The next bubbles: Tech professor talks risks of another recession
HANCOCK — Still recovering from the Great Recession, the United States doesn’t want to see it repeat during our lifetime.
Exploring some of the future risks and the origins of the recession, Latika Gupta, assistant professor of economics at the School of Business and Economics at Michigan Tech, spoke Thursday on “Borrowing, Bernanke, and Beyond: The Whys, Whodunits, and What’s-Nexts of the Great Recession.”
Gupta identified four key areas of potential risk, student loans, the auto-loan market and another tech or housing bubble.
The big one was the student loan debt crisis, an already widely-recognized issue.
“As of 2016, 40 percent of student debt holders had already defaulted on their loans,” Gupta stressed.
If the trend continues she expects a bailout may be necessary, something she expects to be very unpopular, and politically charged, if it occurs.
Gupta sees the auto loan market as another risky area, repeating many mistakes of the housing market crash.
“In the auto loan market we are seeing a situation similar to the subprime mortgage crisis, is that there have been loans given out to people who shouldn’t have qualified for loans… at some point we are going to see a crash,” Gupta said.
As an example, automotive makers in the U.S. gave more in dollar amounts in discounts than they paid to the workers to sell the cars.
Additionally, another housing bubble may be forming on the heels of the first.
“You see a big boost in housing prices especially in big cities, there has been a lot done to boost housing sales after the last housing crisis,” Gupta said. “Is that going to bite us in the back?”
In the vein of repeating crashes, another tech bubble could be forming as well.
“There are so many tech startups now, do we really need that many. Do we really need another start-up for another app,” Gupta asked.
Many factors contributed to the great recession and many parties were part of creating it. That can remain true, Gupta illustrated through her presentation.