Remembering the 2008 Economic Crisis, and Should We Expect Another?
ZAKARIA: So here we are 10 years after the collapse of Lehman precipitated the global financial crisis. We haven't had a crisis since, which means, according to some observers, we're overdue for one. The question is, where will it come from? And what is likely to start this new financial fire? I've asked two great minds in financial journalism to come together to look into the future. Andrew Ross Sorkin is an editor and columnist at the New York Times and the author of "Too Big to Fail." A new edition of the book has just been published to mark the 10th anniversary. And Zanny Minton Beddoes is the editor-in-chief of The Economist, which just published its 175th anniversary edition -- a real blockbuster. Zanny, let me start with you. The recovery is either the longest or the second longest in American history. People say these things don't go on forever. What is the state of the American economy? Are we due for a recession?</s>ZANNY MINTON BEDDOES, THE ECONOMIST: Well, at some point we will definitely have another recession. But I just want to separate two things, because you started talking about a financial crisis and now you're talking about a recession. And I think it's important to distinguish between those. We will definitely have another recession. And we will at some point definitely have another financial crisis. But we may well, next time, have a recession without a cataclysmic financial crisis. What could cause a recession? They tend, as you say, not to die of old age. Probably, and usually in recent history, it's had something to do with the Federal Reserve. If the Federal Reserve tightens policy too much, then it could tip the economy into recession, particularly as the sugar rush of the Trump tax cuts wears off. On the other hand, if it moves too slowly and inflation starts rising, then it will have to damp down pretty quick and that could push the economy into recession. I don't know what will cause it, but like you, I'm pretty sure -- I'm very sure -- that at some point there will be another recession.</s>ZAKARIA: And the crisis. Andrew, when you look around at the world, what seems to you, kind of, unsustainable? You know, is there something that -- like, there were people saying at the time...</s>ANDREW ROSS SORKIN, NEW YORK TIMES: I'm less worried today about a classic run-on-the-bank-style crisis like 2008. What I'm much more worried about is the distrust that was -- has been created as a function of that crisis, and not just the distrust in the United States government and institutions and elites and the idea of experts, which unto itself is a problem, but the populism and nationalism that it's created not just here but everywhere. And so when you think about a financial crisis -- when I wrote "Too Big to Fail," we talked about that in the context of banks. Now we talk about it in the context of municipalities, cities, states, countries. And so when you think about our relationships with our allies, the trade fights we're already starting to see, at some point, do the Chinese say, "You know what; we're not so sure we want to buy your debt at these prices anymore?" At some point, do our allies say, "We don't trust you in the way we used to?" And that, to me, is what will -- if there's going to be another big one, it's much more likely that something like that would precipitate it.</s>ZAKARIA: And, Zanny, that is exactly the kind of thing that you're talking about in your very robust defense of free trade liberalism. You're worried about a world that is moving toward trade wars and worse?</s>BEDDOES: Yeah. We are -- in our anniversary issue this week, we've written a manifesto for renewing liberalism because we feel that, right now, the credo of liberal democracy, which has done so much to promote prosperity around the world, is really under attack. And it's under attack both domestically, as Andrew says, by the rise of populism and nationalism on both sides of the Atlantic, and also because we see in the form of China a rising economy, the world's biggest economy in the 21st century, which is profoundly illiberal.</s>ZAKARIA: And, Zanny, is the next crisis, potentially, that you would worry about, you know, a kind of result of that, which would be a conflict between the United States and China? I mean, certainly the conflict between the two largest economies in the world could easily tip the world, let alone the United States, into a recession?</s>BEDDOES: Absolutely. That could be cataclysmic. An out-of-control trade war is indeed one of the things that I worry about. I also worry, frankly, about the euro area, which is the one bit of the post- 2008 crisis which hasn't really been fixed. It's massively been papered over. And the third thing I'd leave you with, perhaps, is the incredible rise in dollar borrowing outside the United States, which has been huge, that increase in the last few years. And in a world where we have less trust, less willingness to work together, that really worries me. Remember, 10 years ago, in 2008, after the Lehman failure, the world's biggest economies came together. They created something called the G- 20, which was a new club, and a new club essentially designed to bring the world's biggest economies together to work together to get out of the crisis. Can you imagine that happening now?</s>ZAKARIA: So where does that leave you, Andrew? Does it make you think that the United States -- you know, how should it handle the reality of this world? What is -- you know, if you had a magic wand, or if you had President Trump's ear, either of them, what would you tell them?</s>SORKIN: I would try desperately to re-establish a sense of trust with these other countries, a sense that we are operating in a responsible way, a sense that we want to be a leader, not just of America and America first, but of a world and to some degree a world order. And I think that, if we could get that sense of credibility back, I think that it would help us tremendously. I do want to throw one other crisis that I worry about a lot out. And it's not, again, a classic one. It's the one of cyber. And people don't talk about it enough. But when you think about a true panic, I very much worry about waking up in the morning looking in my bank account and seeing zero. And that's something I think we all have to worry about, given the size and magnitude of these institutions today. People talk about these institutions being too big to fail. That's how they're too big to fail.</s>ZAKARIA: All right. That is a sobering point to end on. Andrew Ross Sorkin, Zanny Minton Beddoes, pleasure to have both of you on.</s>SORKIN: Thank you, Fareed.</s>ZAKARIA: Next on "GPS," Pope Francis has been a wildly popular Pope. But now he has a big problem, one that threatens to bring down his papacy. I'll talk to the New York Times' Ross Douthat about that, when we come back.