If the economy slows and unemployment rises, credit card delinquencies could surge, leading to a credit crunch and turning a mild economic downturn into a deep one. This is a prediction from the New York Federal Reserve Bank, cited by the speaker.
"What happens if the economy slows down and unemployment quickly rises? Delinquencies with credit card debt could surge, in turn leading to a self-reinforcing credit crunch. In other words, a mild economic downturn could turn into a deep one."
