Liberty Street Economics

May 13, 2025

Student Loan Delinquencies Are Back, and Credit Scores Take a Tumble

Andrew F. Haughwout, Donghoon Lee, Daniel Mangrum, Joelle Scally, and Wilbert van der Klaauw

This morning, the Center for Microeconomic Data at the New York Fed released the Quarterly Report on Household Debt and Credit updated through the first quarter of 2025. Over the first quarter, overall household debt rose by $167 billion. An increase of $199 billion in mortgage balances and modest increases in home equity lines of credit (HELOC) and student loans were offset by declines in auto loans and credit card debt of $13 billion and $29 billion, respectively. The decline in credit card balances is a typical seasonal pattern associated with consumers paying down holiday spending from the fourth quarter, but the auto loan decline was atypical, the first such decline since the third quarter of 2020. The rates at which auto loans and credit cards became seriously delinquent improved slightly, while mortgage and HELOC transition rates edged up but remained low. However, the delinquency rate for student loans stands out: it surged from below 1 percent to nearly 8 percent, as the pause on reporting delinquent federal student loans ended. In this post, we focus on student loan delinquency, including which borrowers are past due and what it might mean for their access to credit.

Posted at 11:00 am | Permalink | Comments (0)

May 12, 2025

Who Finances Real Sector Lenders?

Nina Boyarchenko, Hyuntae Choi, and Leonardo Elias

Decorative Image: Internet Banking Technology concept

The modern financial system is complex, with funding flowing not just from the financial sector to the real sector but within the financial sector through an intricate network of financial claims. While much of our work focuses on understanding the end result of these flows—credit provided to the real sector—we explore in this post how accounting for interlinkages across the financial sector changes our perception of who finances credit to the real sector.

Posted at 7:00 am in Banks, Credit, Nonbank (NBFI) | Permalink | Comments (0)

April 24, 2025

Gauging the Strength of China’s Economy in Uncertain Times

Jeffrey B. Dawson and Hunter L. Clark

People walking on Nanjing Road, Shanghai, China

Amid increasing pressure on the Chinese economy from China’s trade conflict with the U.S., assessing the strength of the Chinese economy will be an important watch point. In this post, we provide an update on China’s recent economic performance and policy changes. While China is likely to counter growth headwinds from the escalating trade tensions with additional policy stimulus, the country’s complex fiscal dynamics and the varying interpretations of the strength of its economic growth made judgments of the efficacy of China’s policy response challenging even in a more predictable environment. In this respect, we argue that aggregate credit is a simple and effective measure to gauge policy stimulus in China. At present, China’s “credit impulse”—the change in the flow of new aggregate credit to the economy relative to GDP—appears likely sufficient to allow it to muddle through with steady but not strong growth over the next year despite the intensifying trade conflict.

Posted at 7:00 am in International Economics, Tariffs | Permalink | Comments (0)

April 23, 2025

Stablecoins and Crypto Shocks: An Update

Kenechukwu Anadu, Pablo D. Azar, Marco Cipriani, Thomas M. Eisenbach, Catherine Huang, Mattia Landoni, Gabriele La Spada, Marco Macchiavelli, Antoine Malfroy-Camine, and J. Christina Wang

Photo of USD Coin price ticker with up arrows on +2.6% 22.4.

Stablecoins are crypto assets whose value is pegged to that of a fiat currency, usually the U.S. dollar. In our first Liberty Street Economics post, we described the rapid growth of stablecoins, the different types of stablecoin arrangements, and the May 2022 run on TerraUSD, the fourth largest stablecoin at the time. In a subsequent post, we estimated the impact of large declines in the price of bitcoin on cumulative net flows into stablecoins and showed the existence of flight-to-safety dynamics similar to those observed in money market mutual funds during periods of stress. In this post, we document the growth of stablecoins since 2019, including the evolution of the reported collateral backing major stablecoins. Then, we estimate the impact on the stablecoin industry of large bitcoin price increases that occurred between 2021 and 2025.

Posted at 7:00 am in Cryptocurrencies, Financial Markets | Permalink | Comments (0)

April 21, 2025

The Origins of Market Power in DeFi

Pablo D. Azar, Adrian G. Casillas, and Maryam Farboodi

Photoillustration of blockchain in colors of blue.

In our previous Liberty Street Economics post, we introduced the decentralized finance (DeFi) intermediation chain and explained how various players have emerged as key intermediaries in the Ethereum ecosystem. In this post, we summarize the empirical results in our new Staff Report that explains how the need for transaction privacy across the DeFi intermediation chain gives rise to intermediaries’ market power.

Posted at 7:00 am in Cryptocurrencies, Financial Intermediation | Permalink | Comments (0)

April 16, 2025

When College Might Not Be Worth It

Jaison R. Abel and Richard Deitz

Two young college students, woman and man, working on an engineering project together at a table.

In our last post, we showed that the economic benefits of a college degree still far outweigh the costs for the typical graduate, with a healthy and consistent return of 12 to 13 percent over the past few decades. But there are many circumstances under which college graduates do not earn such a high return. Some colleges are much more expensive than average, and financial aid is not guaranteed no matter which college a student attends. In addition, the potentially high cost of living on campus was not factored into our estimates. Some students also may take five or six years to finish their degrees, which can significantly increase costs. Further, our calculations were based on median wages over a working life, but half of college graduates earn less than the median. Indeed, even when paying average costs, we find that a college degree does not appear to have paid off for at least a quarter of college graduates in recent decades. In this post, we consider when college might not be worth it and explore differences in the return to college by major.

Posted at 9:01 am in Education, Human Capital | Permalink | Comments (4)

Is College Still Worth It?

Jaison R. Abel and Richard Deitz

Photoillustration of a college student in the foreground with a backpack. His back is to the viewer. He walking toward a campus building with other students in the distance.

A college degree was once viewed as a surefire ticket to a good job and a clear pathway for upward mobility. However, concerns about the rising cost of college and the struggles of recent college graduates to find good jobs have led many Americans to lose confidence in higher education. This shift in sentiment has become even more widespread since the pandemic, as opportunities and wages have grown for those without a degree as labor markets strengthened. Indeed, many have been left wondering whether college is still worth it. In a two-part blog series, we offer an economic perspective on the value of a college degree, updating our previous research and analysis. This first post examines the costs, benefits, and return for the typical college graduate. We estimate the return to college at 12.5 percent, a rate well above the threshold for a sound investment. Our second post looks beyond the typical graduate and finds a college degree might not be worth it for at least a quarter of college graduates.

Posted at 9:00 am in Education, Human Capital | Permalink | Comments (8)

April 14, 2025

Will Peak Demand Roil Global Oil Markets?

Matthew Higgins and Thomas Klitgaard

Photo illustration of oil barrels stored in a warehouse. AI generated.

“Peak oil”—the notion that the depletion of accessible petroleum deposits would soon lead to declining global oil output and an upward trend in prices—was widely debated in the late 1990s and early 2000s. Proponents of the peak supply thesis turned out to be wrong, given the introduction of fracking and other new extraction methods. Now the notion of peak oil is back, but in reverse form, with global demand set to flatten and then fade amid growing use of EVs and other low-carbon technologies. The arrival of “peak demand” would turn global oil markets into a zero-sum game: Supply growth in one region or field would simply push down prices, driving out higher-cost producers elsewhere. A key question is how U.S. producers would adapt to the new market environment.

Posted at 7:00 am in International Economics | Permalink | Comments (0)

April 11, 2025

Recent Shifts Seen in Consumers’ Public Policy Expectations

Joseph Delehanty, Gizem Kosar, and Wilbert van der Klaauw

Photo: U.S. individual income tax forms 1040 and schedule c.

In this post we examine changes in households’ beliefs following the release of the December 2024 SCE Public Policy Survey, finding large shifts in consumer expectations about future changes in fiscal policy. Households assign higher likelihoods to a variety of tax cuts and to reductions in a range of transfer programs, while they assign lower likelihoods to tax hikes and expansions in entitlement programs. We do not find these sharp changes translate into meaningful shifts in median households’ near-term expectations about the evolution of the overall economy, nor do they appear to have significantly affected median near-term expectations about the household’s own income and spending growth.

Posted at 7:00 am in Expectations, Fiscal Policy, Household Finance, Inflation, Student Loans | Permalink

April 7, 2025

Monetary Policy Spillovers and the Role of the Dollar

Sushant Acharya, Ozge Akinci, Silvia Miranda-Agrippino, and Paolo A. Pesenti

Digital image of world map with currency symbols above it and several dotted lines from one area of the map to another. dark green tone.

In the literature on monetary policy spillovers considered in the two previous posts, countries that would otherwise operate independently are connected to one another through bilateral trade relationships, and it is assumed that there are no frictions in currency, financial, and asset markets. But what if we introduce a number of real-world complexities, such as a dominant global currency and tight linkages across international capital markets? Given these additional factors, is it still possible to draw generalized conclusions about international policy spillovers—and can we still think of them as a fundamentally bilateral phenomenon? In our third and final post, we explore these questions by focusing on two key elements in the determination of international policy spillovers: the U.S. dollar and the Global Financial Cycle.

Posted at 7:02 am in International Economics | Permalink

Markets & Policy Implementation

Liberty Street Economics

Student Loan Delinquencies Are Back, and Credit Scores Take a Tumble

Who Finances Real Sector Lenders?

Gauging the Strength of China’s Economy in Uncertain Times

Stablecoins and Crypto Shocks: An Update

The Origins of Market Power in DeFi

When College Might Not Be Worth It

Is College Still Worth It?

Will Peak Demand Roil Global Oil Markets?

Recent Shifts Seen in Consumers’ Public Policy Expectations

Monetary Policy Spillovers and the Role of the Dollar

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