Rising star warns of economic risks ahead

By Greg Burns
Chicago Tribune

WASHINGTON — These are quiet times in the global economy, just the sort of lull that worries Raghu Rajan, one of the University of Chicago's leading stars.

On loan to the International Monetary Fund, where he became the youngest-ever chief economist and the first from a developing country, the 42-year-old native of India sees risks on the rise in housing markets, hedge funds, pensions — all across the seemingly tame landscape of world finance.

Difficult to track and often disguised, the steady accumulation of risks has increased the odds of what Rajan cautiously terms "a greater [albeit still small] probability of a catastrophic meltdown."

A sharp decline in home prices, for instance, could cripple the job market, trigger loan defaults, hurt anyone invested in mortgage securities and eventually undermine every moving part of the interconnected financial system.

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