Even the most brilliant economic minds are unsure of what will bring about the next financial crisis.
“We need to embrace the fact that we don’t know what the next bad outcome is. We need to think outside the box,” John Williams, the newly appointed New York Federal Reserve president, said at a Town Hall meeting Wednesday.
Williams pointed out that the financial crisis of 2008 is still very much on the forefront of the minds of Fed employees — even if it may not be at the top of the general public’s collective list of concerns.
“The thing that keeps me up at night … is that memories fade. Whether it’s in banking, whether it’s in society more generally, 2008 seems like a long time ago,” he added.
But that isn’t exactly reason for Mom and Pop to be ringing the alarm bells about their financial stability.
“If you look at financial crises in deep recessions, the common culprit is heightened leverage around real estate,” Williams said, adding that he’s not seeing the level of leverage and risk-taking that preceded the financial crisis.
Williams assumed the role of president and chief executive of the New York Fed in June, replacing William Dudley, who held the post for nine years.
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The wide-ranging town hall, held at Brooklyn Law School, came at the end of Williams’ day-long tour through the borough to meet with businesses and local leaders.
He noted that, like San Francisco, New York and other regions in the country have had to contend with the “hollowing out of the middle class.”
Technology has replaced such jobs as bookkeeping, he noted, while leaving high-paying jobs and lower-paying, labor-intensive jobs somewhat intact.
“What I see in the future is, basically a continuation of that process,” he said, adding that the next generation of workers will have to be able to reinvent themselves every few years.
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