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Confronting the Hazards of Rising Leverage
Leverage, the ability to borrow, is a double-edged sword. It can boost economic growth by allowing firms to invest in machinery to expand their scale of production, or by allowing people to purchase homes and cars or invest in education. During economic crises, it can play a particularly important role by providing a bridge to the economic recovery. Most recently, amid the sharp contraction in economic activity brought on by lockdowns and social distancing practices during the COVID-19 pandemic, policymakers took actions to ensure that firms and households could continue to access credit markets and borrow to cushion ... (full story)