Are we anywhere near another financial crisis?
We are certainly in for a summer of volatility.
What factors are you paying special attention to?
We are looking at the weakness in Europe in the bond market. We’re looking at commodities, which in July have been up, particularly the precious metals. We are looking at the oil market, which has been moving up—so much for tapping the Strategic Petroleum Reserve.
Should we start worrying about contagion from the euro crisis?
I think we have our own issues over the near term to reflect on. But I think we should be worried about European contagion. We saw that the Asian crisis in ’97, ’98 did have a ripple effect that reached the U.S.
Is the great moderation—when GDP, employment, industrial production, and other factors became less volatile—finally over? Will we see a higher interest-rate regime?
The great moderation, I think, certainly failed the test over the last 15 years or so. There was too much discord in the marketplace. Looking ahead to a higher rate regime, we’ve been thinking for a long time that it will materialize. But to the degree there continues to be anxiety about the global financial system, I would suspect rates will remain lower than we originally thought over the course of the next several years.