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3 Economists Answer This Question: What Keeps You Up At Night?


All right, the U.S. economy is still recovering from what's become known as the Great Recession, so we hope this won't upset you. Our Planet Money team is already exploring when the next one is coming. They called up three economists to ask what's been keeping them up at night. Here's NPR's David Kestenbaum.

DAVID KESTENBAUM, BYLINE: Crises, the kind that cause big messes, are, by their nature, hard to predict. That's one of the reasons they cause such a mess because they are surprises. Though, if you look back at the last one, some people did see it coming, like this guy.

ROBERT SHILLER: I'm Robert Shiller, professor of economics, Yale University.

KESTENBAUM: Can you add that you're a Nobel Prize winner and that you predicted the Great Recession?

SHILLER: (Laughter) You want me to say that? You're supposed to say that.

KESTENBAUM: Shiller won his Nobel Prize for his work on bubbles. Here is what's keeping him up at night - he thinks there may be a bubble forming in the stock market, driven in part by low interest rates. Low interest rates mean that people earn almost nothing on the money in their savings accounts. Treasury bonds also pay very little interest.

SHILLER: People love to talk about the power of compound interest, but the problem is that there's no interest (laughter). There's no compound interest either. I think that people, they want to save, but there aren't enough investment opportunities, so they end up just bidding up prices of what's out there - bonds, stocks, housing. They're all - in the U.S., they're all kind of expensive and maybe for much of the world.

KESTENBAUM: And eventually you think something will crash.

SHILLER: Well, I don't know for sure, but possibly, yeah.

KESTENBAUM: Next, we called up Robert Flood. He's a retired professor at Notre Dame, and the thing that keeps him up at night is people like him - people who are retired.

ROBERT FLOOD: What's happening is we're getting to have a lot more old people. At the end of World War II, the typical life expectancy was 67 years. Now it's just about 80 years.

KESTENBAUM: Retired people depend on working age people to pay for Social Security and Medicare, to make the economy grow. So if retired people make up a larger and larger part of the population, at some point, he says, the math just does not work.

Does this actually keep you up at night?

FLOOD: Well, now that I'm an old guy, yeah.

KESTENBAUM: This is a totally fair thing to worry about, but it is not quite what we were looking for. We wanted to find that giant falling anvil that was about to hit us all in the head. So we tried Carmen Reinhart, professor at the Harvard Kennedy School. She had co-wrote a book looking back 800 years at all the giant anvils that had smashed economies. And we did a kind of lightning round with her. We asked her about various economic worries you hear these days. First - student debt.

CARMEN REINHART: It's - it's big, but this is not - this is not going to bring down financial institutions.

KESTENBAUM: In order to get a big systemic crisis going, the problem needs some way to spread. Most student loans are held or backed by the U.S. government. Next up - Greece.

Should I worry about it affecting me?

REINHART: Probably not.

KESTENBAUM: Greece's troubles also unlikely to spread. We asked about China and we asked about this one other thing. This one was a little obscure, though The Wall Street Journal ran an op-ed about it titled "How The Next Financial Crisis Will Happen." It was about how banks were buying and selling fewer bonds. My colleague Jacob Goldstein asked her about this one.

JACOB GOLDSTEIN, BYLINE: OK, next up, not enough liquidity in the bond market.

REINHART: What does that mean?

GOLDSTEIN: (Laughter) I agree, thank you.

KESTENBAUM: There are certainly economic problems to worry about. There will be recessions. there will be moments where people freak out on CNBC. But giant falling anvils like what happened in 2008, historically, Carmen Reinhart says, those are rare.

REINHART: Look, the Great Recession has happened once since 1930s. Look at the factors that drove the U.S. to the Great Recession. We had a multiyear - multiyear festival in the housing market supported by the surge in subprime mortgages, and household indebtedness reached its highest levels historically. That's not where we are.

KESTENBAUM: Where we are may be one of those quiet periods. Let's hope. David Kestenbaum, NPR News. Transcript provided by NPR, Copyright NPR.

David Kestenbaum is a correspondent for NPR, covering science, energy issues and, most recently, the global economy for NPR's multimedia project Planet Money. David has been a science correspondent for NPR since 1999. He came to journalism the usual way — by getting a Ph.D. in physics first.
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