Harvard economist Kenneth Rogoff warns that a sudden spike in interest rates is the biggest threat to the global economy.

Rogoff explained to the BBC that people have got used to ultra-low interest rates.

The former IMF economist also said the economic policies of the Trump administration posed a risk.

"If something was to happen that pushes interest rates up, we could see a lot of soft spots — places where there is high debt — start to unravel," Rogoff said.

He also said that the economic policies of the White House were creating uncertainty, without naming specific policies, the BBC explained.

"The risk is that the White House or the U.S. will do something really irrational. That may seem hyperbolic but we are all holding our breath," Rogoff said.

Rogoff said althought the U.S. had substantially recovered from the downturn of 2007-8, a generation had been "scarred" by the crash and many young people had struggled to find work as a result.

"I think the crash greatly amplified this wave of populism that the world's feeling right now," he said. "The U.S. would not have had Donald Trump as president without the crash."

Trump’s vow to unleash “fire and fury” against North Korea sounded a lot like the rhetoric Kim Jong Un uses to threaten America. And it may prove to be just as empty, Bloomberg warned. 

Trump has no good military options in the face of mounting evidence that Kim will soon be able to hit Los Angeles or Denver with nuclear missiles.

North Korea’s weapons and nuclear facilities "are dispersed and hidden throughout the country’s mountainous terrain. Failing to hit them all would leave Japan, South Korea and U.S. military bases vulnerable to attack -- with either conventional or nuclear warheads." And even if the U.S. managed to destroy everything, Seoul would still be vulnerable to North Korea’s artillery, Bloomberg explained.

With reports suggesting that Kim now has up to 60 nuclear warheads, millions could die.

“When you run any cost-benefit analysis, it’s insanity,” said John Delury, an assistant professor at Yonsei University in South Korea.

To be sure, investors have grown cautious over escalating tensions between the United States and North Korea.

The loss of appetite for risk followed North Korea's claim it was completing plans to fire four intermediate-range missiles over Japan to land near the U.S. Pacific territory of Guam in an unusually detailed threat, Reuters reported.

Trump said on Thursday afternoon that his earlier warnings to North Korea may not have been tough enough.

The three major U.S. stock-market indices have sold off this week amid investors' jitters after Trump said on Tuesday that threats from Pyongyang would be "met with fire and fury like the world has never seen."

Investors bought safe-haven assets such as gold, helping the precious metal touch a two-month high, and the Japanese Yen rose.

“We’re due for a little correction here. When you’re due, there’s always going to be something that happens in the world that’s going to make people nervous. It gives them almost a mental excuse to sell. What’s happened in North Korea is enough to do that,” said Matthew Peterson, Chief Wealth Strategist for LPL Financial in Charlotte, North Carolina.

“Although we certainly can get a five to seven percent correction, we don’t think it’s the start of a significant bear market.”

(Newsmax wires services contributed to this report).

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