The Real Finds Podcast, Episode 109: Michael Klein of The Fletcher School at Tufts University and EconoFact

Gordon Lamphere, J.D., of Van Vlissingen and Co. sits down with Michael Klein, former Chief Economist in the Office of International Affairs at the U.S. Treasury, the William L. Clayton Professor of International Economic Affairs at The Fletcher School at Tufts University, and founder and Executive Editor of EconoFact, to discuss exchange rates, tariffs, trade deficits, Federal Reserve independence, and what all of it means for commercial real estate. This transcript has been lightly edited for clarity.

Gordon Lamphere (00:06): In today’s podcast, we have on Professor Michael Klein. Michael is a former Treasury Chief Economist, the William L. Clayton Professor of International Economic Affairs at The Fletcher School at Tufts University, and founder of EconoFact, the nonpartisan site translating economic research into plain English memos. Today we have a plain English conversation about the state of the US economy, the global economic factors influencing commercial real estate markets, and a straightforward discussion of the major economic terms and forces shifting the global economy. If you are interested in economics or the state of the US real estate market, today’s podcast is well worth a listen. Michael, thank you so very much for hopping on the podcast today.

Michael Klein (00:55): Thanks. Thanks for asking me to join you.

Gordon Lamphere (00:58): So what got you into the world of economics?

Michael Klein (01:03): That goes back 50 years or so. I guess I was always interested in it. I remember as a kid, my father worked in a tannery in upstate New York, and I remember him coming home and saying, “Brazil is starting to export leather. We’re going to be in trouble.” That really stuck with me. I also remember asking him why the stock market crash caused the Great Depression. He gave me an answer, and I remember thinking to myself, “Well, I don’t really understand how that fits.” So when I went to college, I started out as an English major, and then after a principles of economics course and a course in Shakespeare, I learned about comparative advantage and I switched over.

Gordon Lamphere (01:52): Well, let’s try to get a little bit of an advantage today. One of the things I find interesting is that your experience at Tufts and in academia changed how you perceive the way economists interact with the world. You created EconoFact and have really worked on developing it to educate laypeople about economics. So I’m curious: how do you think about the interface between economics and the public, and how can we improve it?

Michael Klein (02:29): That was really the goal of EconoFact. I had the initial idea in 2016, and I was working very closely with a former student of mine who became a friend and was herself an economic journalist, Miriam Wasserman. It really grew out of my time serving in the government. I was the Chief Economist in the Office of International Affairs at the US Treasury for 18 months, from 2010 through 2011. When I went there, I asked my boss, “What should I be doing?” There had not been another chief economist in international affairs at that point for several years. He said, “Well, you’re smart, you’ll figure it out.” At that point I doubted both parts of that statement.

What I decided was that my biggest contribution could be doing research. So in my 18 months there, almost every week I would write a short research paper that would go to the Under Secretary for International Affairs, who was then Lael Brainard. Sometimes they would go up to Tim Geithner, the Treasury Secretary. Apparently sometimes they also went up to President Obama. I’m not quite sure. But the goal was to explain timely and important economic policy issues to an audience that did not necessarily have a background in economics.

When I came back to teach in the master’s program at the Fletcher School at Tufts, I decided that would be a really useful skill for students to have. How do you translate what you learn in economics and statistics and econometrics into a form that works in a professional setting, where people don’t have the same background in statistics or economics as you do? It was a very successful course. Then in 2016 I decided I wanted to expand that idea into a website, an initiative where I could get economists from across the country to write on issues in which they were expert but typically did not approach the general public, because you’re not really rewarded for that.

Michael Klein (04:54): As an academic, you’re rewarded for journal articles that talk to other economists, where you use a lot of jargon because it’s useful shorthand, and where you present analyses that depend on pretty sophisticated statistical techniques. But I thought you could explain most of this to a lay audience anyway. That was the real goal, and it came directly out of my experience in government.

Gordon Lamphere (05:24): Outside of how government uses a site like yours, one of the things I found interesting is that you talk about principles of everyday life that are essential not just to the market but to how the market is being shaped. One you’ve spent a lot of time on is exchange rates and why they’re important. So I’m curious: why do exchange rates matter?

Michael Klein (05:58): The economist Milton Friedman said the exchange rate is the single most important price in an economy. The reason is that this one price translates the goods you’re selling abroad from your domestic currency into a foreign currency, and the goods you’re purchasing from abroad from a foreign currency into your domestic currency. So it has a very pervasive effect. In an economy like the United States, it matters somewhat less than in an economy like France or Japan or Great Britain, because of the amount of trade we have relative to the whole economy. But it’s still a very important price.

A lot of my research when I was publishing in academic journals was about the determination of exchange rates, policies to try to affect exchange rates, and how exchange rate movements affect, for example, labor markets. That was a real focus of what I was doing as a researcher. Of course, with EconoFact, we post about a very wide range of things, and what’s really been enjoyable for me is that I’ve learned a lot about a lot. As a researcher, you tend to become very narrow, a very deep expert in your field. For EconoFact, I’ve had to learn about immigration, about mortgage markets, about housing markets, about fiscal policy, about the social safety net, child welfare, a whole slew of things. That’s been a very nice part of my experience with EconoFact over these last ten years.

Gordon Lamphere (07:42): So let’s dive into that. We don’t need to get into the full specifics of housing policy or the social safety net, but when we’re talking about exchange rates, what should a business owner or investor be looking at on a day-to-day, month-to-month, or year-to-year basis? How does that play out in their everyday lives?

Michael Klein (08:04): It depends on what industry you’re in. For example, in housing, exchange rates matter because a lot of the inputs to build housing, residential and commercial, come from abroad: steel, wood, things like that. When the exchange rate changes, you can see differences in the prices of wood or steel. That’s one way it matters in that industry. Another way is that, as a consumer, the exchange rate changes the price of imported goods. And what’s interesting is that it’s not just the price of imported goods that changes, but the price of domestically produced goods that compete with those imports can change as well.

We have a great example of that with the imposition of tariffs. Tariffs are distinct from exchange rates, but both affect the prices of goods you buy from abroad. In one of our memos, Alberto Cavallo, a professor at Harvard Business School, has done very careful work looking at online prices. What he found, and I guess it’s pretty well known now, is that it’s actually Americans who are paying for the tariffs. But one of the really interesting parts is that it’s not just imported goods whose prices have risen. Domestically produced goods that compete with those imports have risen as well.

This has important implications, because one of the motivations for tariffs is to raise revenue. It’s a tax on imported goods, so it’s sort of like a sales tax. But it’s not, because when domestically produced goods rise in price, no tax is collected on that. Those prices are rising just to compete with the foreign goods. A sales tax raises revenue from all the goods sold. A tariff raises revenue only from the foreign goods purchased in the country, not from the domestic goods whose prices have risen in concert with the imports.

Gordon Lamphere (10:23): When we’re talking about imports and exports, one of the biggest conversations I have with many of my clients, particularly those in the industrial world, whether manufacturing or import-export, is about the price of the dollar.

Michael Klein (10:41): The exchange rate, yes.

Gordon Lamphere (10:50): I hear it from a variety of parties, some wanting a strong dollar, some wanting a weak dollar. Is there merit to either? Is a strong dollar or a weak dollar better for the US economy? What does an ideal situation look like for the strength of the dollar?

Michael Klein (11:14): As you were suggesting, different people are advantaged by a strong dollar or a weak dollar. Exporters are helped by a weaker dollar because it makes American goods cheaper abroad. Importers are advantaged by a stronger dollar because it makes foreign goods cheaper in the United States. So there isn’t a universal view. It’s competing interests. I wrote a case study many years ago where I had two quotes from the same day, one from the New York Times and one from the Wall Street Journal. The dollar was weakening, and the Wall Street Journal was saying this is terrible, and the New York Times was saying this is great, because they were talking to different constituencies.

Gordon Lamphere (12:10): When we talk about different constituencies, whenever the dollar strengthens or weakens, or exchange rates shift, or we see tariffs, there’s churning in the economy. Is churning a good thing, or something we should be afraid of?

Michael Klein (12:27): It’s not that it’s a good thing. It’s like the sun rising. It’s always with us. I did some research years ago on churning in the labor market, which means simultaneous hiring and firing. What was really striking, and this is something I learned by doing the research, is that in the labor market there are definitions of industries at different levels. You can have steel. Then you can have a narrower definition, steel bars. And a narrower one still, steel bars of a certain length. You can go up to 440 different categories. What I imagined was that when the dollar moved, you would see whole subcategories hiring or whole subcategories shedding workers. The really striking thing was that even within very narrow categories, you would have simultaneous hiring and letting go of workers. That’s just because in a very dynamic economy, a lot is going on. Churning is evidence that the economy is growing and changing and evolving. It’s a deep fact of an economy like the United States, where market forces affect not just industries but individual firms within an industry, perhaps in different ways.

Gordon Lamphere (13:56): One of the things affecting the economy in different ways is the bilateral trade deficits we’ve been running. I remember in 2016, I grew up in a family with a mother who worked for a number of prominent University of Chicago economics professors, so economics was definitely in my household, but it was the first time I heard vehement fights over the Thanksgiving dinner table about trade deficits. So I’m curious: how should we perceive trade deficits as a worker, as an employer, as a citizen of the United States?

Michael Klein (14:37): I think that’s one of the biggest misconceptions, because people often use the metaphor, “If my company runs a deficit, that’s bad for my company.” A trade deficit is very different. At one level, bilateral trade deficits are somewhat meaningless because of international supply chains. I have an EconoFact memo with my friend Marc Melitz where we drew on research showing that when the United States imported an iPhone 7 from China, it counted as something like a $300 import. The actual value added from China was five dollars. All the other components came from South Korea or Vietnam or even the United States itself, and they were just assembled in China. But the full cost was recorded as the trade deficit with China. So the trade deficit with China grossly overstated the actual value added at that time, and it must also be the case that other bilateral deficits were understated, because overall you’re trading with somebody in the world.

So bilateral trade deficits are statistically problematic. But also, I have a bilateral trade deficit with my grocery store, and my students have a bilateral trade deficit with me, and we don’t get upset about that. That’s just comparative advantage. We do what we do. In many ways, a bilateral trade deficit is not a meaningful macroeconomic statistic.

For the aggregate trade deficit, there’s a basic result in economics: an aggregate trade deficit represents a situation where a country is spending more than it’s earning. That’s just arithmetic. I tell my students, you’re running big trade deficits because you’re spending a lot more than you’re earning. Hopefully they’re not starving, because they’re borrowing money.

Michael Klein (17:07): But it makes sense for them to do that, because in doing so, they’re getting training, they’re building up what economists call human capital, and they become more productive in the future. So the question with a trade deficit is not whether you have one. If you have a trade deficit, you’re borrowing money. What are you using the borrowing for? I use the example with my students: if you borrow money through a student loan and you come to my class especially, you’re going to get these great skills, be more productive, earn more in the future, and your lifetime earnings net of the borrowing will be higher than they would have been otherwise. However, if you took the loan check, bought a Ferrari, drove around the country, and eventually crashed the Ferrari, you’d be on the hook for the loan with no extra productive capacity. It’s really about what you do with the money.

In the 1990s, the so-called Asian tigers were borrowing a lot of money, but it wasn’t clear it was going to useful purposes. They said the national bird of Thailand was the crane, not the bird but the construction crane. They were building all this housing and office space that never got used. Just as if you crash the Ferrari and have to impoverish yourself later to pay back the money, the people of countries where trade deficits are not used to finance productive investment are going to have to impoverish themselves to pay back what they’ve borrowed.

Gordon Lamphere (18:44): How should we perceive that in terms of national security? A lot of the individuals we work with are national security contractors, and there’s this idea that a trade deficit on certain things, like shipping or ships, is a necessity we may want to keep onshore or at least within our ally network. Is that something economists dive into, or is that more a public policy realm that touches on economics?

Michael Klein (19:23): I think it’s more of a public policy realm, but it’s worth thinking about. For example, aluminum is very important for a range of military and non-military uses. Producing aluminum is very energy intensive. Canada is a big exporter of aluminum because of hydropower. So the question is, are we threatened by the fact that Canada is an important source of aluminum for the United States? A few years ago, nobody would have said anything. Now, who knows?

I think a bigger issue has to do with semiconductors. The places where the most advanced semiconductors are built are Taiwan and, to a certain extent, South Korea, and there are obvious geopolitical tensions involved. So that is something where it does merit some concern and some ideas about onshoring to the extent you can. Having said that, this is an incredibly complicated, sophisticated production process, and you can’t easily just start up advanced semiconductor factories in the United States.

Other things depend on rare earths. You hear a lot about rare earths now, and we have a really nice EconoFact memo on that. The problem with rare earths is that they come from only a few places, and mining them is tremendously environmentally degrading. Processing them is even worse. A lot of it comes from China because the government doesn’t have to answer to its people in the same way when it undertakes these incredibly degrading processes. A lot also comes from Indonesia. It’s not clear it would be easy to mine and process rare earths in the United States, and according to the memo we published, even if you tried, there’s a very long lead time. So there are legitimate concerns, and it is a thorny problem.

Gordon Lamphere (21:45): Is there a way to navigate around the thorny problem of reducing our trade deficits? Or is it just a reality of the world that there are geopolitical, geological, or human capital reasons certain countries produce different things, and we have to deal with that? One of the facts that blew my mind in some of the recent economic data is that between 2025 and 2026, the tariffs didn’t significantly move the needle on bringing the trade deficit down. It moved some, from the data I saw, but not significantly.

Michael Klein (22:36): No, right.

Gordon Lamphere (22:42): So how should we perceive economic policy in general? Are humans just going to be humans, and we have to let things flow? Or are there things we can do as a nation to adjust international trade and the exchange of goods?

Michael Klein (22:55): I think humans are going to be humans by definition. What you’re mentioning are quite distinct issues. There’s the aggregate trade deficit, which I’ve argued is a macroeconomic issue. There are bilateral trade deficits, which, to the extent they’re real and not just an artifact of how statistics are gathered, reflect comparative advantage. And then there’s a distinct, much narrower issue you’re bringing up about particular goods that have a national security aspect. I would argue you really want to keep those as separate arguments: aggregate trade, bilateral trade, and the much smaller set of goods where there is an important effect on national security.

To your point, yes, tariffs did not affect the trade deficit in the United States, because the trade deficit is a macroeconomic thing. And even where a tariff was trying to benefit something, what’s really interesting is that, as we talked about with exchange rates, the same tariff can help some manufacturing industries and hurt others. One of our most influential memos is about how many jobs in the United States make steel versus how many use steel. Kadee Russ, who’s at UC Davis, and Lydia Cox, who’s now at the University of Wisconsin, did the original research. It took them a long time, but it became really important. They found that when you look at all the interactions, for every job that makes steel, there are 80 jobs that use steel. So if you put a tariff on steel, you might help a steel-producing plant in Pennsylvania, but you’re going to hurt the places that make washing machines, cars, dishwashers, a very wide range of things.

Michael Klein (25:19): One of the journalists we had on our quarterly journalist podcast, EconoFact Chats, Heather Long, was talking to people from Pennsylvania, her home state, who work in a furniture factory. She thought going in that they’d be glad about the tariffs, but they were saying, “No, it’s really hurting us, because we import a lot of wood from Canada.” All of these things point to there not being an easy answer. And returning to your point about critical goods, there are ways you might want to think about stockpiling, or looking for alternative sources, or ideally finding substitutes in production, although that’s very hard for things like rare earths.

Gordon Lamphere (26:16): Speaking of things that are very hard, one of the challenges is that the whole idea of tariffs has become so politicized. I hate to turn on the media on either side sometimes, and there are very few voices really trying to stick to the facts. I think you all do a pretty good job of that. So when we speak about tariffs in general, are they useful at all? Is there anything good about them? And how should workers, citizens, and businesses see tariffs?

Michael Klein (26:59): There’s an interesting study done by the Booth School at the University of Chicago, where they survey top economists on all sorts of public policy questions. The one question where there was more unanimity than anything else was: do broad-based tariffs benefit a country? The answer was no. Right-leaning, left-leaning, it’s a basic result of economics, and I think we’re seeing it borne out. So when you hear people talking about the advantages of tariffs, the question is, where are you coming from? If you’re well informed, you’d think, sure, some companies could benefit, but others are going to be hurt. And we’re not just producers, we’re consumers as well. On net, things are made worse. Tariffs are a policy that economists almost universally say is not a good idea. But a lot of people will find some economic reason, valid or not, to argue a point they wanted to argue anyway. A little bit of cynicism goes a long way in this world.

Gordon Lamphere (28:32): One of the cynical things I see play out across the political and economic spectrum is that whenever there’s a point of fear, I hear talk that we’re going to lose the dollar’s status as the petrodollar, or lose dollar dominance in the global economy. I certainly have my fears about that as somebody involved in business, but overwhelmingly, I think there’s still a pretty significant moat. Can you talk about how you see the dollar’s position of power? Are we on the verge of losing dollar dominance, or is that more of a things-go-bump-in-the-night economic fear?

Michael Klein (29:18): That’s a really good and subtle question. When people talk about dollar dominance, it can mean two very different things. After World War II, the so-called Bretton Woods system was set up, with fixed exchange rates: the dollar fixed to gold, and all other currencies fixed to the dollar. In that case, there was a real advantage to having the dollar at the center of the international monetary system. The United States could more or less set monetary policy as it wanted, and other countries had to follow. That system broke apart in 1973. Since then, we’ve had generalized floating exchange rates, what my co-author Jay Shambaugh and I call the modern era in our book, the post-Bretton Woods era.

The dollar still has a special role in the world, though. Part of it is that a huge amount of trade is denominated in dollars, both imports coming into the United States and exports going out. Even trade between two countries that doesn’t involve the United States, say Brazil selling to Italy, will typically go from reais to dollars, then dollars to euros. So the dollar has what’s called vehicle currency status.

But perhaps the biggest advantage for the United States is not so much the dollar as the Treasury market. The ten-year Treasury market is perhaps the deepest and most liquid market in the world, and it has been seen as very safe. What that means is that interest rates on ten-year Treasury bonds will be lower than rates on comparable bonds from other countries, because the market is so liquid and considered so safe that it’s a benchmark. And the ten-year Treasury rate is the basis for mortgage rates, car loan rates, things like that. So there is an advantage in terms of somewhat lower interest rates, but it’s not the dollar per se. It’s the Treasury market. Now concerns have arisen that, with the current administration, that might be threatened.

Michael Klein (31:45): I did an EconoFact memo with my colleague Charles Collyns where we looked at what happens when uncertainty spikes in the world. Typically, the dollar would strengthen, because people would come and buy US Treasuries as a safe haven. We looked at separate four-month periods, and the two times when this measure of uncertainty spiked and the dollar in fact weakened rather than strengthened were the first four months of Trump’s first term and the first four months of Trump’s second term. So you’re playing with fire when you say things like, “Maybe we’ll charge central banks to hold US Treasuries,” or, “I’m not sure we really need to repay everything in a timely fashion.” You’re screwing up the international financial system to your own detriment as well.

Gordon Lamphere (32:44): Any time someone who has lent money hears they might not get paid back, it causes a little worry. In terms of things that should worry us, for many of my friends who work on Wall Street and in finance, the period that caused the most worry, funny enough, was some of the interactions from the current administration, in both terms, around Federal Reserve independence. How do you see that playing out? Fed independence has been a debate for the better part of two hundred years. The Jackson administration, and many people since, thought there was never really central bank independence. Recently, though, the Fed has seemed at least somewhat independent. How do you see Federal Reserve independence playing out, and why is it important for the average US citizen?

Michael Klein (34:05): When people talk about the independence of the Federal Reserve, one of the trick questions I ask in class is: there are three branches of government, executive, judicial, and legislative. Which is the Fed in? The answer is none. When the Federal Reserve Act was passed in 1913 and the Fed started in 1914, we had come through quite a few financial crises that were handled by private bankers at the time. Just as you would want the judicial system not to be swayed by politics, and you would want the scientific system not to be swayed by politics, there are decisions that should be made based on facts and analysis. For the same reason, you want monetary policy not to be swayed by politics. Otherwise you get start-and-stop monetary policy, which can be very destabilizing.

The best example is Nixon. In the run-up to the 1972 election, there’s evidence he was leaning on Fed Chairman Arthur Burns to spur the economy ahead of the election to help his re-election chances, partly because Nixon felt Eisenhower hadn’t done enough in 1960 to spur the economy when he ran against Kennedy. We have a really interesting piece by Thomas Drechsel, a professor at the University of Maryland, who did a careful analysis showing that the number of times administration officials meet with Fed officials, alongside the other things that determine inflation, by itself predicts higher inflation than there would otherwise be. So pressure from the administration can have a big destabilizing effect.

The way it’s constructed in the United States, and increasingly across the world, because of both empirical research and theoretical research that was awarded the Nobel Prize, is that you want a firewall between the Treasury and the central bank. Otherwise there’s an incentive for the central bank to monetize the debt, to buy up government debt, which is very inflationary. You also want a firewall between the Fed and the executive and legislative branches, because otherwise there’s an incentive for what are called political business cycles: you juice up the economy before an election, which helps the incumbents, and afterwards there’s a crash.

Michael Klein (36:32): This has been recognized for a long time. For example, people told President Reagan he had to say something to Volcker because of the recession, and he said, “No, that’s not right. That’s not what we should be doing.”

The current administration has made no secret that it wants to control Federal Reserve policy. It wants lower interest rates. The question is whether Kevin Warsh, now that he’s chair of the Federal Reserve, will act in line with what President Trump wants or show independence. Just last week was the first Open Market Committee meeting under Warsh, and they chose to hold interest rates steady, which I guess gives some people some relief. But it remains to be seen, because it’s a very fraught time. Inflation rose in each of the last three months, and in May it was the highest it’s been since 2023. That would not call for cutting interest rates, but the administration is still pressuring the Fed, as it did through its attacks on Jay Powell and on Lisa Cook. Now that they have their person in Kevin Warsh, are they going to continue to attack the Fed if Warsh does not accede to the president’s demands?

Gordon Lamphere (38:49): Speaking of the demands of the president and Congress, basically anybody I know who’s elected runs on a platform of affordability these days, and inflation is key to that. Conversely, many of the people who listen to this podcast are on the upper end of the income curve, tend to own a lot of assets, and inflation has been relatively good for them. I personally think it’s not good long term, because it creates a lot of inequality and stress. How should we see affordability and inflation over the next couple of years, and is that a key issue for long-term economic health?

Michael Klein (39:39): As you’re suggesting, it’s certainly a key issue for lower-income people who find it very expensive when they go to the supermarket, fill up their car, or heat their houses in the winter. Some of these are own goals, as you’d say in soccer, because of tariffs and because of the war in Iran. It should have been very clear that the Strait of Hormuz would be closed and that would lead to skyrocketing oil prices.

There are a lot of affordability issues, and you have to look almost sector by sector. In housing, one of the main issues is supply. The supply of housing is very low compared to need. It had been an issue mostly in coastal cities, and now it’s spreading to cities throughout the country. Some of that is regulation and zoning, and the source of some of that is NIMBY, not in my backyard. That’s a longer-term thing where we have to have a change that allows for more multifamily housing and greater density. Another obvious issue is medical care, which is very expensive, and there’s a lot to discuss there.

If you think about food prices, tariffs are hurting food prices. In the last EconoFact Chats we did with journalists from the New York Times, Financial Times, NPR, and the Boston Globe, Binyamin Appelbaum of the New York Times pointed out that there are really bad drought conditions in the West, and that’s going to start to show up in food prices and be a big drain on people’s wallets. The other side of affordability, of course, is not how much you pay but how much you make, and what could help people earn more. I’m not necessarily convinced the minimum wage helps a lot; we have evidence about who really benefits from it.

Michael Klein (42:04): But, for example, greater labor rights and greater unionization: there’s evidence that tends to raise wages, not just in the unionized sectors but through spillover effects elsewhere. So it’s a multifaceted challenge, and it’s a strain on the economy and on the body politic because of the rising inequality you mentioned.

Gordon Lamphere (42:33): I’m a firm believer that both sides can learn a lot from each other, and there are a lot of issues on trade policy and on making it easier to build, particularly on the housing side, that you touched on. One of the ways we love to dive into a guest’s knowledge is our Real Finds Final Four. It’s a nice wrap-up to learn a little more about you and where you see the world going. So I’m curious: if there’s one thing we’re not talking enough about, what should we be talking about?

Michael Klein (43:31): Because you’re really focused on real estate, I’ll say that I’m the only one of four siblings who isn’t involved in real estate. My two brothers are in appraisal and sales, and my sister worked in commercial property management. So before today’s interview, I called my sister to ask what I should be thinking about.

In commercial real estate, there are a lot of really interesting things going on. One is that working from home has become so important, so you see a lot of extra commercial real estate space. You have what’s called hoteling, where you don’t have a permanent office but go in and use one. That’s going to have a big effect on the commercial real estate market, as will the falloff in retail through online purchasing. Then there’s the question: if we have all this extra commercial real estate, can’t we convert it to housing? I think the answer is basically no. They’re very different kinds of buildings, unless you have a teardown.

One thing we saw in the Boston area where I live is what seems to have been an overbuilding of biotech office space. This is very common in real estate: a boom, overbuilding, and then a crash. I think there are going to be some real concerns about that. More broadly, if that comes to pass, what are the implications for the wider economy? We saw in 2008, when the mortgage markets collapsed, what that did to the economy because of the opacity of mortgages. We don’t know how opaque some of these new financial instruments like private credit are, how exposed they are, or how much leverage is involved. That’s something we don’t know, but we should be concerned about and try to learn more.

Gordon Lamphere (45:51): Private credit is certainly a known unknown. We’ve seen a number of private credit deals come across our desk, and we’ve looked under the hood for a variety of reasons. Some look great and some look really, really bad. So there’s a lot of worry there, though I don’t know whether it’s founded.

One of the things we do worry about is the future, and one of my favorite questions is: what do you see the world looking like ten years from now, based on everything you know about economics?

Michael Klein (46:35): To be fair, if somebody had asked me ten years ago what the world would look like today, I would have been so wrong. Yogi Berra said predictions are hard, especially about the future. When people say economists aren’t good at forecasting, my answer is, yes, because a lot of non-economic things impinge on economics. What happens in the midterm election could have a big impact. What happens in the next presidential election could have a big impact. What happens with the war in Ukraine? What happens with the Strait of Hormuz? All of these things affect the economy, and I have no special expertise in politics or geopolitics or military strategy. So with all due respect, I tend to avoid answering questions like that. It’s too hard.

A rejoinder is that we should be in a situation where we have options open. Right now we don’t have as many options, partly because the federal debt is as big as GDP, so there isn’t what economists call fiscal space to deal with a crisis if one arises. That’s one concern. There are other policy concerns as well: the holes in the social safety net, and whether we’re going to leave more and more people behind, which has gotten worse over the last year or two with cuts to safety net programs. You can even think globally, with the cuts in aid programs to other countries. We’re seeing an Ebola outbreak now that may be worse than it would have been if we hadn’t cut aid. The world is an interconnected place, and if we try to pull up the drawbridge around us, that’s not going to work.

Michael Klein (48:59): So those views, how interconnected we are and how we need to be prepared for crises, should drive how we think about moving forward, fully humble about the fact that we don’t really know what’s going to happen, but knowing there are ways to address these things, and some are better than others.

Gordon Lamphere (49:20): Beyond humility in international relations or economics, I try to focus on humility in my own life, and that’s probably the biggest thing I’ve learned as I’ve aged. One of the questions we love to ask about taking that step back and passing something to the younger generation is: what advice would you give yourself at the start of your career if you had one minute?

Michael Klein (49:56): I guess I would have told myself that things will work out better than you can imagine, because they did. But the fact that I didn’t give myself that advice might have meant I worked harder than I would have otherwise. Things turned out better than I would have imagined.

Gordon Lamphere (50:18): That’s probably true. Those late nights are always a little easier when you have a fear of the unknown on the other side. In terms of the unknown, we don’t always know who the next person on the podcast should be, and we find the men and women in the arena know better than anybody. So who should be our next guest?

Michael Klein (50:48): Your focus is much more on housing and real estate, and I think one issue that’s really important is home insurance. We saw the very dramatic effects of the floods in North Carolina, for example. I had a wonderful podcast interview with David Marlett at Appalachian State University in North Carolina, who is an expert in home insurance and who, at the time of the floods, was actually in the high school gym helping people figure out how to make claims. That’s a really important issue that maybe doesn’t get enough attention until it becomes a disaster. He’d be a great person to talk to.

Gordon Lamphere (51:46): I’d love a contact for David. That’s definitely in our alley, and it’s an issue we consistently hear about from both subscribers and clients. It’s a crucial part of the commercial real estate industry. Another crucial part of anything is being able to reach out and get in contact with our guests. If somebody wants to reach out to you, what’s the best way?

Michael Klein (52:16): I would encourage people to visit our site, read our memos, and listen to our podcast. The site is econofact.org. We’re sponsored by the Fletcher School at Tufts University, where I teach. You can reach me at [email protected], and I receive all of those emails.

Gordon Lamphere (52:46): Michael, thank you so very much. We really appreciate having you on, and we’ll have to have you on again in the future.

Michael Klein (52:51): It was really nice to speak with you today. Thank you for inviting me.

Gordon Lamphere (52:55): Thanks again to Michael. We appreciate his insights. And if you enjoyed the podcast, please give us a like, a five-star rating, and a review. Your comments, interactions, and subscriptions truly matter and help us continue to get quality guests. You can find us on YouTube, Spotify, or wherever you get your podcasts. I’m Gordon Lamphere of The Real Finds Podcast, and thank you for listening.

Van Vlissingen and Co. has been the Midwest’s oldest commercial real estate brokerage, development, and management firm since 1879, and today is independently ranked the #1 commercial real estate agency in Chicagoland, home to the #1 independently ranked agent, Gordon Lamphere, and the region’s #1 ranked commercial property management team. If you own, manage, or invest in energy-adjacent, mixed-use, or transit-oriented property across Lake County, the North Shore, the Northwest and O’Hare corridors, DuPage and the I-88 corridor, Will County, or southern Wisconsin’s Pleasant Prairie, Kenosha, and Racine markets, contact Van Vlissingen and Co. at 📞 847-634-2300 or 🌐 vvco.com. For a market-wide view of where these dynamics sit today, see our State of the Chicagoland Commercial Real Estate Market for Q3 2026.