Moreover, the complexity of some structured products obscured high levels of leverage, which exacerbated losses when the underlying asset values declined.3 The linkages between traditional banks and shadow banks meant that vulnerabilities spread. For example, when asset-backed securities came under pressure, the sponsoring banks faced significant drains through the credit and liquidity lines they had provided.
I delivered a paper about this a few weeks ago at a conference hosted by the Federal Reserve Bank of San Francisco. Besides, the near-term risks around productivity growth are tilted to the downside. This is because trade conflicts, and the emergence of nationalist or populist policies more generally, threaten to reverse some of the prior productivity gains made through globalization.