Central Questions EP. 5: Credit Booms, Crashes—Do Policymakers Act Too Late?

Are financial crises really impossible to predict?

Harvard economist Andrei Shleifer argues that the warning signs are often visible long before a crisis erupts. Rapid credit growth, deteriorating lending standards and unusually narrow credit spreads can all point to growing fragility—yet investors and policymakers repeatedly struggle to act before it is too late.

In this live episode of Central Questions, Shleifer joins former Riksbank Governor Stefan Ingves to discuss why credit cycles matter so much for the economy, why sophisticated investors move together during booms, what economic models missed before the 2008 financial crisis, and whether authorities should intervene before they are certain a crisis is coming.

They also discuss private credit, behavioral finance, the difficulty of timing markets, and why preventing a crisis can be politically harder than cleaning one up afterwards.

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Guest: Andrei Shleifer is the John L. Loeb Professor of Economics at Harvard University
Host: Stefan Ingves, former Governor of the Riksbank and Senior Fellow at Swedish House of Finance