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CAMBRIDGE, MASS.—It was a festive scene in the Harvard Faculty Club here on Wednesday. Carolers in white tie were singing Christmas songs in the lobby. University bigwigs were kicking back for the holidays and had crowded into the upstairs restaurant for lunch. But despite all the cheer, it was a good moment to have lunch with Harvard economics professor Kenneth Rogoff, because elsewhere world markets were hearing a much less cheerful tune.

Investors...