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Some economists speculate too much growth will be the cause of our next recession.
It’s a risk that comes when investors bet on the economy remaining weak. If the markets surge against investor expectations, the bad bets could shake the financial system, Wall Street Journal reports.
“Ironically, one can think of a scenario where a stronger-than-expected expansion leads to financial trouble, which in turn puts into question the expansion itself,” International Monetary Fund former chief economist Olivier Blanchard says.
If economists’ warnings are right, a swift improvement in the economy could spur the Federal Reserve to increase rates, which would then affect borrowing costs and those portfolios based on lower rates. “If the economy were to pick up faster than markets think…it could lead to financial turmoil,” Olivier says. [WSJ]
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