Economic Perspective: Threats to the Economy

MARY WALDEN:

“Today’s program looks at threats to the economy. Mike, you and other economists are constantly being asked to evaluate the economy, and to particularly look at factors in the economy that could lead to a recession. It seems to me this is a tall order since there are so many things that can derail economic growth. Am I right?”

MIKE WALDEN:

“Well you’re certainly right, and in fact Deutsche Bank, which is a major world bank obviously headquartered in Germany, recently published a paper where they listed not five, not 15, not 20 but 30 major threats to continued economic growth in the world economy.”

“Now I don’t have time to go through all 30 of them, but among them are potential for a recession in China, potential for a recession in Europe, the direction of interest rates, are they going up and down, the impact of continued federal borrowing, continued federal government borrowing, Brexit, that is the breaking of the economic ties between UK and Europe, European parliamentary elections and the Italian fiscal crisis. There actually is a fiscal crisis going on in Italy right now.”

“Now I might throw in more to that list. I might throw in negotiations, U.S. negotiations with North Korea. As well as the current Venezuelan political crisis between their current leader and the person who says that he was duly elected. So there are lots of things out there that could derail the economy.”

“And I think the point of all this is not to make people worry but simply for people to realize that when you look to someone like me or other economists and say, ‘Tell me what’s out there, and tell me exactly what’s going to happen,’ we really can’t be sure because there’s so many possibilities out there that can cause economic growth to slow down, if not cause the economy to go into a recession. So the economy is extremely complicated, number one, and lots of things that impact that complicated economy.”

Mike Walden is a William Neal Reynolds Distinguished Professor and Extension Economist in the Department of Agricultural and Resource Economics at North Carolina State University who teaches and writes on personal finance, economic outlook and public policy.