WEBVTT - Ken Rogoff Talks Dollar's Fall from Grace

0:00:00.080 --> 0:00:09.000
<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news Postwnion.

0:00:08.480 --> 0:00:11.119
<v Speaker 2>Tom Keen for all of you worldwide, and right now

0:00:11.240 --> 0:00:14.400
<v Speaker 2>a joy to have an extended conversation with Kenneth Grogoff

0:00:14.800 --> 0:00:18.280
<v Speaker 2>of Harvard University. The scope and scale of his literature,

0:00:18.320 --> 0:00:23.680
<v Speaker 2>from textbooks the classic Maurice Sobsfeld of Berkeley and International Economics,

0:00:23.720 --> 0:00:27.479
<v Speaker 2>over to every effort Carmen Reinhardt and him changing the

0:00:27.600 --> 0:00:30.680
<v Speaker 2>dialogue of America with this time is different. I love

0:00:30.720 --> 0:00:33.840
<v Speaker 2>the subtitle Paul eight Centuries of Financial.

0:00:33.440 --> 0:00:35.600
<v Speaker 1>Following We've enjoyed them all.

0:00:35.960 --> 0:00:39.040
<v Speaker 2>The bravest book I've ever seen in doing this act.

0:00:39.120 --> 0:00:43.200
<v Speaker 2>The Curse of Cash was an exceptionally brave book, going

0:00:43.280 --> 0:00:47.320
<v Speaker 2>head on against corruption, crypto and negative interest rates. And

0:00:47.360 --> 0:00:49.360
<v Speaker 2>now we celebrate, and it is my book of the

0:00:49.400 --> 0:00:53.960
<v Speaker 2>summer in economics, Our Dollar, Your Problem. It's a bright

0:00:54.040 --> 0:00:57.280
<v Speaker 2>green cover, Ken, probably Natasha picked out the green cover.

0:00:57.640 --> 0:01:01.560
<v Speaker 2>Kenneth Grogoff joins us right now, Ken, what a well

0:01:01.600 --> 0:01:06.000
<v Speaker 2>timed book to say the least is a US dollar resilient?

0:01:06.680 --> 0:01:12.720
<v Speaker 3>Well, it's resilient, but maybe it might not be as

0:01:12.760 --> 0:01:13.679
<v Speaker 3>dominant as.

0:01:13.520 --> 0:01:14.240
<v Speaker 1>It once was.

0:01:15.000 --> 0:01:17.679
<v Speaker 2>I look Ken at the scope and scale of your

0:01:17.720 --> 0:01:21.080
<v Speaker 2>work and everybody dovetails it in to your look at

0:01:21.120 --> 0:01:23.479
<v Speaker 2>our fiscal space. We were just talking with way Leah

0:01:23.520 --> 0:01:29.959
<v Speaker 2>Blackrock about this exploding debt, these exploding deficits. As you

0:01:30.080 --> 0:01:33.720
<v Speaker 2>bring out our dollar, your problem is it the same

0:01:33.760 --> 0:01:37.200
<v Speaker 2>old story of angst and worry about the debt and deficit?

0:01:37.280 --> 0:01:41.400
<v Speaker 2>But we move forward or are we at a tipping point?

0:01:41.760 --> 0:01:44.640
<v Speaker 3>Well, I mean, the book is a sweeping history of

0:01:44.680 --> 0:01:47.119
<v Speaker 3>the rise of the dollar after World War Two, all

0:01:47.120 --> 0:01:50.400
<v Speaker 3>the competitors, how hard it is to live with crypto

0:01:50.680 --> 0:01:53.760
<v Speaker 3>and many other things. And by the way, I hope

0:01:54.080 --> 0:01:57.480
<v Speaker 3>I've made it entertaining enough that people will get through it.

0:01:58.120 --> 0:02:00.600
<v Speaker 3>But certainly data is a big piece of it. If

0:02:00.640 --> 0:02:05.320
<v Speaker 3>we think of the future. And Tom, you've had all

0:02:05.400 --> 0:02:09.320
<v Speaker 3>kinds of people on the program. I remember you had

0:02:09.400 --> 0:02:13.600
<v Speaker 3>Olivier Blanchard and Larry Summers and many others who were

0:02:14.000 --> 0:02:17.280
<v Speaker 3>convinced that the interest rates were for a long time,

0:02:17.280 --> 0:02:20.359
<v Speaker 3>we're just going to keep declining forever. So dead is

0:02:20.400 --> 0:02:26.080
<v Speaker 3>a free lunch. That was Olivier's American Economic Association presidential

0:02:26.080 --> 0:02:29.000
<v Speaker 3>address in twenty nineteen. It's a great piece of work,

0:02:29.480 --> 0:02:32.840
<v Speaker 3>but I'm not sure it's a good prediction. I've been

0:02:32.960 --> 0:02:37.040
<v Speaker 3>arguing for a very long time that their real interest

0:02:37.080 --> 0:02:39.280
<v Speaker 3>rates something about the ten year rate, not the Fed

0:02:39.320 --> 0:02:43.880
<v Speaker 3>funds rate, that real interest rates have some convergence to

0:02:43.960 --> 0:02:47.440
<v Speaker 3>mean reversion to mean, what do you know? And that's happened.

0:02:47.880 --> 0:02:50.680
<v Speaker 3>That's what the panic about the DAD is now. It

0:02:50.919 --> 0:02:54.280
<v Speaker 3>always was going to happen. So I think people had

0:02:54.360 --> 0:02:56.600
<v Speaker 3>their head in the sand to think that we were

0:02:56.639 --> 0:03:00.800
<v Speaker 3>safe from that. Maybe AI will save us, but I

0:03:00.840 --> 0:03:01.440
<v Speaker 3>don't think so.

0:03:02.040 --> 0:03:03.440
<v Speaker 1>That's why the debt's filing up.

0:03:03.480 --> 0:03:07.280
<v Speaker 3>Our interest bill is more than doubled, it's about to triple,

0:03:07.919 --> 0:03:10.440
<v Speaker 3>and it's more than our defense budget now.

0:03:10.760 --> 0:03:14.840
<v Speaker 1>So yes, that is, and that and the deficit.

0:03:15.240 --> 0:03:18.200
<v Speaker 3>And by the way, I'm just amazed at how few

0:03:18.280 --> 0:03:22.600
<v Speaker 3>people really understand deficit and debt aren't the same thing.

0:03:22.840 --> 0:03:26.080
<v Speaker 3>I mean, I know most of your listeners do, but

0:03:26.160 --> 0:03:30.320
<v Speaker 3>you'd be so surprised. You know, obviously, the deficits, how

0:03:30.400 --> 0:03:33.680
<v Speaker 3>much you're spending, and the debts, what your credit card

0:03:33.760 --> 0:03:38.120
<v Speaker 3>bill has gotten to. And I think the problem with

0:03:38.320 --> 0:03:42.160
<v Speaker 3>the United States is not Trump, and it's not Biden.

0:03:42.360 --> 0:03:44.400
<v Speaker 1>It's not the right, it's not the left. It's the

0:03:44.400 --> 0:03:45.520
<v Speaker 1>American people.

0:03:45.880 --> 0:03:50.000
<v Speaker 3>Right now just don't believe in any need for raining

0:03:50.040 --> 0:03:53.920
<v Speaker 3>things in and until we have I think another inflation

0:03:54.080 --> 0:03:57.360
<v Speaker 3>crisis or some kind of crisis. I don't think anybody

0:03:57.480 --> 0:03:58.680
<v Speaker 3>is going to be able to achieve that.

0:04:00.160 --> 0:04:03.720
<v Speaker 2>For this and extended conversation, Yale University Press called me

0:04:03.840 --> 0:04:07.440
<v Speaker 2>up to DiCaprio is playing Rogueff in the movie coming

0:04:07.480 --> 0:04:09.080
<v Speaker 2>out in twenty twenty seven.

0:04:09.360 --> 0:04:11.240
<v Speaker 1>I need to sell the book, folks.

0:04:11.360 --> 0:04:17.920
<v Speaker 2>It's wonderfully brief but very deep, and it's wonderfully, wonderfully accessible.

0:04:18.320 --> 0:04:21.280
<v Speaker 2>This is the book you throw at your Brady college

0:04:21.360 --> 0:04:24.640
<v Speaker 2>kid this summer and say shut up and read it.

0:04:24.720 --> 0:04:28.040
<v Speaker 2>He opens, and this goes back to Rochester, New York,

0:04:28.080 --> 0:04:30.039
<v Speaker 2>when he and I used to go up to house

0:04:30.040 --> 0:04:33.920
<v Speaker 2>the guitars years ago. He opens with the economist, Grace

0:04:33.960 --> 0:04:38.840
<v Speaker 2>Slick and Jefferson airplane in Sarajebel. This book is accessible

0:04:38.839 --> 0:04:41.719
<v Speaker 2>when you got Jefferson Airplane in the first key pages.

0:04:41.760 --> 0:04:45.479
<v Speaker 4>Paul Sweeney, Professor, I think most of our listeners, most

0:04:45.520 --> 0:04:48.440
<v Speaker 4>of our viewers over the last several months have kind

0:04:48.480 --> 0:04:50.880
<v Speaker 4>of brushed up on their knowledge of tariffs. Here we've

0:04:50.880 --> 0:04:53.480
<v Speaker 4>all tried to figure out what it all means. How

0:04:53.520 --> 0:04:56.520
<v Speaker 4>do you present the concept of tariffs to your students?

0:04:57.279 --> 0:05:01.480
<v Speaker 3>Well, I'm in I think we when we teach tariffs,

0:05:01.560 --> 0:05:06.360
<v Speaker 3>we're not nestily teaching crazy wild tariffs going all over

0:05:06.400 --> 0:05:10.760
<v Speaker 3>the place. We teach suppose country a PU it's a

0:05:10.800 --> 0:05:14.919
<v Speaker 3>five percent tariff on and country b retaliates by putting

0:05:14.960 --> 0:05:18.200
<v Speaker 3>a five percent tariff. And frankly, if that had been

0:05:18.440 --> 0:05:20.160
<v Speaker 3>all along, what was going on.

0:05:20.920 --> 0:05:23.400
<v Speaker 1>It's a tax. I don't agree with it.

0:05:23.880 --> 0:05:27.240
<v Speaker 3>I don't think it's well conceived, but you know, it

0:05:27.279 --> 0:05:28.560
<v Speaker 3>wouldn't be the end of the world.

0:05:29.000 --> 0:05:30.360
<v Speaker 1>We can cut other taxes.

0:05:30.760 --> 0:05:35.920
<v Speaker 3>What has been, you know, so destabilizing to markets was

0:05:36.400 --> 0:05:40.120
<v Speaker 3>this idea tariffs could be used to solve every problem.

0:05:40.520 --> 0:05:42.359
<v Speaker 1>I just came back from the UK. I don't know

0:05:42.360 --> 0:05:45.080
<v Speaker 1>if you followed this that Trump.

0:05:44.880 --> 0:05:50.280
<v Speaker 3>Wanted the British to have more free speech as part

0:05:50.279 --> 0:05:53.560
<v Speaker 3>of his condition for releasing tariffs and things like that

0:05:53.800 --> 0:05:56.560
<v Speaker 3>all over the world. And you know, I think one

0:05:56.640 --> 0:06:00.359
<v Speaker 3>of the things that's probably cheered markets up as the

0:06:00.680 --> 0:06:03.560
<v Speaker 3>I think one of Trump's better qualities is he as

0:06:03.640 --> 0:06:07.279
<v Speaker 3>a pragmatist, and when something doesn't work, he finds a

0:06:07.320 --> 0:06:10.240
<v Speaker 3>way to back out. And I think everyone sees that's

0:06:10.279 --> 0:06:13.320
<v Speaker 3>what's going on. You played some clips of him from

0:06:13.720 --> 0:06:19.720
<v Speaker 3>Cutter recently him using the word beautiful constantly. Tariffs were beautiful,

0:06:19.760 --> 0:06:21.120
<v Speaker 3>It's going to be a beautiful thing.

0:06:21.520 --> 0:06:23.560
<v Speaker 1>No, it's not. It was a disaster.

0:06:23.680 --> 0:06:27.080
<v Speaker 3>It was probably the worst policy in my five decades

0:06:27.120 --> 0:06:30.440
<v Speaker 3>as an economist. But you know, even though he won't

0:06:30.480 --> 0:06:35.320
<v Speaker 3>admit that it was so dumb, he's retreated, which is smart.

0:06:35.839 --> 0:06:38.600
<v Speaker 3>And so I think that's probably why the markets are

0:06:38.680 --> 0:06:39.240
<v Speaker 3>cheered up.

0:06:39.839 --> 0:06:42.479
<v Speaker 4>The markets are cheered up, Professor. We've seen the stock

0:06:42.520 --> 0:06:45.560
<v Speaker 4>market erase. You know, most of the losses here were

0:06:45.600 --> 0:06:48.200
<v Speaker 4>now flat for the year. But we haven't seen that

0:06:48.240 --> 0:06:51.080
<v Speaker 4>in the dollar. The dollar's really taken a pound here,

0:06:51.920 --> 0:06:53.880
<v Speaker 4>a pounding here. How do you feel about.

0:06:53.640 --> 0:06:55.919
<v Speaker 3>The US dollar here, Well, it's up a shade in

0:06:55.960 --> 0:06:59.279
<v Speaker 3>the last few days. I think I think the dollars

0:06:59.400 --> 0:07:03.920
<v Speaker 3>way over valued. So not for the reasons the administration

0:07:04.040 --> 0:07:07.240
<v Speaker 3>is saying. It's just very high. It's not high because

0:07:07.279 --> 0:07:11.720
<v Speaker 3>the dollar is a reserve currency. The mar A Lago Plan,

0:07:12.640 --> 0:07:15.080
<v Speaker 3>the dollar has been very low, and the dollar has

0:07:15.120 --> 0:07:19.240
<v Speaker 3>been a reserve currency. You know, throughout this the dollar

0:07:19.400 --> 0:07:22.840
<v Speaker 3>goes in roller coaster waves. It's on a super high.

0:07:23.400 --> 0:07:25.320
<v Speaker 3>I would have to go back to two thousand and

0:07:25.320 --> 0:07:28.480
<v Speaker 3>two and before that to nineteen eighty five to see

0:07:28.480 --> 0:07:31.560
<v Speaker 3>anything like it. And what do I mean by high,

0:07:32.400 --> 0:07:35.760
<v Speaker 3>I mean looking at the purchasing power of the dollars,

0:07:35.800 --> 0:07:39.960
<v Speaker 3>so very simplistically, you know, think of yourself as a

0:07:40.120 --> 0:07:44.080
<v Speaker 3>Japanese tourist in the United States or an American tourist

0:07:44.120 --> 0:07:47.840
<v Speaker 3>in Japan. You're going to have very different experiences right

0:07:47.880 --> 0:07:51.000
<v Speaker 3>now than you might have, you know, even ten years ago.

0:07:51.880 --> 0:07:54.440
<v Speaker 1>So Japan's had almost no inflation.

0:07:54.920 --> 0:07:59.000
<v Speaker 3>We've had buckets of inflation making prices high.

0:07:59.280 --> 0:08:02.080
<v Speaker 1>And yet and yet the dollar's gone way.

0:08:02.000 --> 0:08:04.960
<v Speaker 3>Up against the end, and the Euro has had a

0:08:04.960 --> 0:08:07.960
<v Speaker 3>bit of inflation, but less than us. And again the

0:08:08.040 --> 0:08:11.200
<v Speaker 3>dollar's gone up against zero. It's very hard to predict

0:08:11.240 --> 0:08:14.200
<v Speaker 3>exchange rates. If I go back to my long career

0:08:14.960 --> 0:08:18.760
<v Speaker 3>more than forty years ago, my first really well known

0:08:18.920 --> 0:08:23.840
<v Speaker 3>paper was about how hard it was to understand, much

0:08:23.920 --> 0:08:29.640
<v Speaker 3>less predict exchange rates. However, over the years, an exception

0:08:29.800 --> 0:08:34.040
<v Speaker 3>to that has become clear. When something's way out of line.

0:08:34.280 --> 0:08:38.200
<v Speaker 3>The end right now is really low, the dollars really high.

0:08:38.640 --> 0:08:40.560
<v Speaker 3>Over a couple of years, it's going to come down.

0:08:40.640 --> 0:08:43.679
<v Speaker 3>So I think, you know, Trump may take credit for it.

0:08:43.679 --> 0:08:46.280
<v Speaker 3>I wrote a piece about this a year ago. I said,

0:08:46.360 --> 0:08:50.400
<v Speaker 3>that doesn't matter whose president, Gravity is going to bring

0:08:50.440 --> 0:08:51.280
<v Speaker 3>the dollar down.

0:08:51.600 --> 0:08:55.200
<v Speaker 2>Ken Rugoff with this. Folks who celebrate my economic book

0:08:55.200 --> 0:08:57.280
<v Speaker 2>of the summer on YouTube, take a look bright Green,

0:08:57.360 --> 0:09:02.400
<v Speaker 2>cover our dollar your problem. KENN'SO hugely accessible for those

0:09:02.440 --> 0:09:04.320
<v Speaker 2>of you on Bloomberg Radio. It's just simple.

0:09:04.360 --> 0:09:07.560
<v Speaker 1>It's very, very readable.

0:09:07.440 --> 0:09:09.079
<v Speaker 2>And I want to go to one of the chapters

0:09:09.080 --> 0:09:11.920
<v Speaker 2>where there's a bit of heavy lifting. Ken Rogoff, you

0:09:12.000 --> 0:09:14.720
<v Speaker 2>go back to values you started to staying in France.

0:09:15.240 --> 0:09:18.360
<v Speaker 2>Who gave us the phrase exorbitant privilege? Berry ken Green

0:09:18.400 --> 0:09:22.240
<v Speaker 2>has written about it many other worthies is well, are

0:09:22.280 --> 0:09:26.479
<v Speaker 2>we losing our exorbitant privilege? Are we losing the American

0:09:26.600 --> 0:09:29.000
<v Speaker 2>advantage we've had for decades?

0:09:29.480 --> 0:09:32.440
<v Speaker 1>Well, I think it peaked about a decade ago. By

0:09:32.640 --> 0:09:33.720
<v Speaker 1>my reckoning.

0:09:34.600 --> 0:09:38.120
<v Speaker 3>The footprint of the dollar, by some measures, has risen,

0:09:38.200 --> 0:09:41.920
<v Speaker 3>but I think by really some key ones. In particular,

0:09:42.040 --> 0:09:45.840
<v Speaker 3>the one I look at is how foreign central banks

0:09:46.800 --> 0:09:50.400
<v Speaker 3>regulate their economies and their currencies against the dollar. I

0:09:50.400 --> 0:09:55.439
<v Speaker 3>think it was in decline, and my book argues at

0:09:55.480 --> 0:09:57.240
<v Speaker 3>the end of it. It's not the whole book, but

0:09:57.280 --> 0:09:59.480
<v Speaker 3>my book argues at the end of it that in

0:09:59.679 --> 0:10:02.920
<v Speaker 3>edition into the fact that China needs to break free,

0:10:03.040 --> 0:10:07.280
<v Speaker 3>that's just happening, and Asia is half the dollar block,

0:10:07.720 --> 0:10:12.040
<v Speaker 3>so that lowers our footprint. The fact the Europeans also

0:10:12.160 --> 0:10:16.080
<v Speaker 3>hated and if they hadn't screwed up by bringing Greece

0:10:16.400 --> 0:10:21.800
<v Speaker 3>into the European the eurosystem way prematurely, the euro might

0:10:21.840 --> 0:10:22.839
<v Speaker 3>be doing better today.

0:10:22.880 --> 0:10:24.800
<v Speaker 1>And that's all back on track.

0:10:25.360 --> 0:10:28.920
<v Speaker 3>But I think the biggest problems are from within, which

0:10:29.040 --> 0:10:33.840
<v Speaker 3>is that our deficits are out of control, and I

0:10:33.880 --> 0:10:36.760
<v Speaker 3>don't think we're bringing them under control. And I also

0:10:36.880 --> 0:10:41.320
<v Speaker 3>feel federal reserve independence from both the left and the right,

0:10:41.960 --> 0:10:42.880
<v Speaker 3>is under assault.

0:10:43.320 --> 0:10:44.360
<v Speaker 1>Tom, I want to go back.

0:10:44.400 --> 0:10:47.720
<v Speaker 3>I'm so glad you noticed Grace slick by the way

0:10:49.559 --> 0:10:54.000
<v Speaker 3>I bring it in early to show how much other

0:10:54.120 --> 0:10:58.520
<v Speaker 3>countries love the United States and yet they hate the

0:10:58.640 --> 0:11:02.520
<v Speaker 3>United States. And I'll mention you know, I was seventeen

0:11:02.600 --> 0:11:04.600
<v Speaker 3>years old. I think when that I was in a

0:11:04.640 --> 0:11:08.559
<v Speaker 3>bar in Sarajevo. People are singing to the Jefferson airplane

0:11:08.720 --> 0:11:12.360
<v Speaker 3>and I was completely oblivious because I just was so

0:11:12.480 --> 0:11:15.800
<v Speaker 3>close minded that my best someone who has become my

0:11:15.880 --> 0:11:18.840
<v Speaker 3>best friend in chess, was actually giving chess lessons.

0:11:18.840 --> 0:11:19.600
<v Speaker 1>A great slip.

0:11:21.480 --> 0:11:23.959
<v Speaker 2>We should mention here that mister Rogoff, in our ut

0:11:24.040 --> 0:11:26.160
<v Speaker 2>and we all knew this in Western New York, was

0:11:26.840 --> 0:11:29.760
<v Speaker 2>esteemed in the effort of chess and has kept at

0:11:29.840 --> 0:11:35.559
<v Speaker 2>it for years and is well. His affiliation with one B.

0:11:35.760 --> 0:11:38.200
<v Speaker 2>Fisher is noted from his childhood.

0:11:38.400 --> 0:11:39.400
<v Speaker 1>Oh, let's do this, Paul.

0:11:39.480 --> 0:11:41.360
<v Speaker 2>Let's jump in here with a couple more questions with

0:11:41.400 --> 0:11:43.800
<v Speaker 2>Professor Rogoff. We're going to go to news on an

0:11:43.800 --> 0:11:47.000
<v Speaker 2>incredibly busy day rebrief you on the markets, and we're

0:11:47.040 --> 0:11:49.840
<v Speaker 2>thrilled to ken Rogoff will join us on the state

0:11:49.960 --> 0:11:53.520
<v Speaker 2>of America in another section here in a moment, Paul.

0:11:53.360 --> 0:11:56.079
<v Speaker 4>Sweeney, Professor, I think most of our listeners and yours

0:11:56.120 --> 0:12:00.679
<v Speaker 4>grew up at a time where globalization was the backdrop economically.

0:12:00.800 --> 0:12:01.959
<v Speaker 2>Thank you for bringing this up.

0:12:02.160 --> 0:12:06.800
<v Speaker 4>Where is globalization over? I can't think of a world

0:12:06.840 --> 0:12:10.600
<v Speaker 4>where we're not just thinking on a global basis about

0:12:10.600 --> 0:12:12.920
<v Speaker 4>global economics, global politics, global defense.

0:12:13.600 --> 0:12:16.520
<v Speaker 3>Well, we're definitely in a different era than we were.

0:12:16.800 --> 0:12:21.280
<v Speaker 3>I mean, it had been changing before Donald Trump. So actually,

0:12:21.320 --> 0:12:24.640
<v Speaker 3>economists refer to the period up to the financial crisis

0:12:24.640 --> 0:12:26.880
<v Speaker 3>two thousand and eight two thousand and nine as the

0:12:26.920 --> 0:12:30.400
<v Speaker 3>period of hyper globalization and then it really did.

0:12:30.360 --> 0:12:31.520
<v Speaker 1>Slow down a lot.

0:12:32.040 --> 0:12:36.160
<v Speaker 3>Trade growth, slowed down other measures, and you sometimes maybe

0:12:36.320 --> 0:12:41.400
<v Speaker 3>heard the expression slobalization. And now we're definitely in retreat,

0:12:42.120 --> 0:12:47.480
<v Speaker 3>introducing the tariffs, the war, and the Ukraine, the great

0:12:48.160 --> 0:12:51.600
<v Speaker 3>cyber Wall of China that's going up, and I think

0:12:51.640 --> 0:12:56.199
<v Speaker 3>that has dramatic effects for the global economy, for interest rates,

0:12:56.280 --> 0:12:57.000
<v Speaker 3>for inflation.

0:12:58.280 --> 0:12:59.080
<v Speaker 1>It's a big thing.

0:13:00.040 --> 0:13:03.560
<v Speaker 3>Paper at Brookings just over a year ago, of a

0:13:03.559 --> 0:13:08.359
<v Speaker 3>couple of papers with some very talented young co authors,

0:13:09.160 --> 0:13:14.959
<v Speaker 3>Hassan Afrizzi, Marina Hollick and Pierrard. They joke that they

0:13:15.120 --> 0:13:17.360
<v Speaker 3>don't think they're young, because the two of them are

0:13:17.360 --> 0:13:18.320
<v Speaker 3>in the mid forties.

0:13:18.360 --> 0:13:19.480
<v Speaker 1>But I think they're young.

0:13:20.120 --> 0:13:23.920
<v Speaker 3>And Pierre's on Trump's consul of Economic Advisors now, by

0:13:23.960 --> 0:13:27.760
<v Speaker 3>the way, and we argue that this period where it

0:13:27.840 --> 0:13:32.400
<v Speaker 3>was easy sledding for the central banks because globalization made

0:13:32.440 --> 0:13:35.720
<v Speaker 3>it easier to deliver good outcomes, it's over and they're

0:13:35.720 --> 0:13:36.640
<v Speaker 3>in a tougher period.

0:13:36.760 --> 0:13:37.959
<v Speaker 2>Kind of want to get this in. I think it's

0:13:37.960 --> 0:13:40.360
<v Speaker 2>too important as we wait for Michael Barr and then

0:13:40.480 --> 0:13:42.480
<v Speaker 2>it's kind of thrown off. One of the great moments

0:13:43.000 --> 0:13:46.960
<v Speaker 2>of my act was you and Joe Stiglitz together in Davos.

0:13:47.000 --> 0:13:48.800
<v Speaker 2>I thought it was a miracle to get you two

0:13:49.280 --> 0:13:53.599
<v Speaker 2>warring over the years in a collegial way. Joe Stiglitz,

0:13:53.720 --> 0:13:56.160
<v Speaker 2>change the dialogue as you did with this time is

0:13:56.240 --> 0:14:01.480
<v Speaker 2>different with our discontent over globalization and Ken Rogoff, what

0:14:01.559 --> 0:14:04.160
<v Speaker 2>does our next globalization look like?

0:14:04.640 --> 0:14:06.560
<v Speaker 3>I mean, I think we're going to go through a

0:14:06.679 --> 0:14:13.040
<v Speaker 3>period where we're breaking up more. Donald Trump initiated it.

0:14:13.160 --> 0:14:16.360
<v Speaker 3>The Chinese we're doing a lot, so I think we're

0:14:16.400 --> 0:14:18.720
<v Speaker 3>in a period of retreat. I mean, it's very political.

0:14:18.880 --> 0:14:22.440
<v Speaker 3>It's hard to know. I think it'll unfold slowly. The

0:14:22.640 --> 0:14:26.440
<v Speaker 3>princedent historic economic historian Harold James actually wrote a book,

0:14:26.440 --> 0:14:31.560
<v Speaker 3>I think around twenty ten, noting that globalization goes in waves.

0:14:31.640 --> 0:14:34.360
<v Speaker 3>It goes up, it goes down just because it's booming.

0:14:34.880 --> 0:14:38.000
<v Speaker 3>We've had periods what that's happened before, and this kind

0:14:38.000 --> 0:14:43.200
<v Speaker 3>of populous discontent. He it's normal and you get a retreat.

0:14:43.280 --> 0:14:45.920
<v Speaker 3>I think the long term is more, but over the

0:14:45.920 --> 0:14:47.760
<v Speaker 3>next couple of decades maybe.

0:14:47.480 --> 0:14:50.000
<v Speaker 2>Not plustni in time, Keen, what did joy to continue

0:14:50.000 --> 0:14:52.600
<v Speaker 2>with Ken Rogoff? We celebrate my book of the Summer

0:14:52.640 --> 0:14:56.520
<v Speaker 2>Our Dollar at your problem. And as you know always

0:14:56.560 --> 0:14:59.720
<v Speaker 2>with Ken Rogoff, there has to be a money chapter

0:15:00.600 --> 0:15:03.560
<v Speaker 2>on our gross debt. The money chart is on page

0:15:03.600 --> 0:15:06.520
<v Speaker 2>two sixty six, near the end of the book, and

0:15:06.600 --> 0:15:09.200
<v Speaker 2>it is on the all in debt. He and Carmen

0:15:09.240 --> 0:15:14.640
<v Speaker 2>Reinhardt codified this a decade ago, with this time as different. Ken,

0:15:14.880 --> 0:15:20.320
<v Speaker 2>that chart is absolutely jaw dropping of our gross debt.

0:15:20.760 --> 0:15:24.360
<v Speaker 2>I guess full faith and credit corporate and hidden debts

0:15:24.440 --> 0:15:27.760
<v Speaker 2>as well. Is the rest of the world concerned about

0:15:27.760 --> 0:15:28.640
<v Speaker 2>our gross debt?

0:15:29.840 --> 0:15:30.440
<v Speaker 1>Excuse me?

0:15:30.720 --> 0:15:35.920
<v Speaker 3>The United States accounts for roughly half of all advanced

0:15:35.960 --> 0:15:41.920
<v Speaker 3>country debt, we public debt, we account for more than half,

0:15:41.960 --> 0:15:44.720
<v Speaker 3>perhaps of all corporate bonds.

0:15:45.320 --> 0:15:49.080
<v Speaker 1>So we're big. And I think what's hitting the United.

0:15:48.720 --> 0:15:53.720
<v Speaker 3>States now more than the gradual loss of exorbit and

0:15:53.760 --> 0:15:56.960
<v Speaker 3>pribleic What's hitting us is the normalization of interest rates.

0:15:57.320 --> 0:16:00.640
<v Speaker 1>If you're the world's biggest debtor, hurts.

0:16:00.840 --> 0:16:03.640
<v Speaker 2>I mean, I look Ken at the real yield, I say, Ken,

0:16:03.680 --> 0:16:06.480
<v Speaker 2>in a simplistic way, as we look on the Bloomberg terminal,

0:16:06.840 --> 0:16:08.880
<v Speaker 2>I look at the ten year real yield as a.

0:16:09.000 --> 0:16:12.520
<v Speaker 1>Keel absolutely so absolutely I got it. I got a

0:16:12.560 --> 0:16:14.359
<v Speaker 1>C plus.

0:16:14.360 --> 0:16:16.680
<v Speaker 2>He gives out he's like Steve roach a yield he

0:16:16.720 --> 0:16:18.080
<v Speaker 2>gives out no aser bees.

0:16:18.440 --> 0:16:19.800
<v Speaker 1>I'm looking Ken Rogoff for.

0:16:19.840 --> 0:16:20.400
<v Speaker 2>A ten year.

0:16:20.640 --> 0:16:23.160
<v Speaker 1>You must be taking another class than mine.

0:16:23.440 --> 0:16:27.120
<v Speaker 2>But anyway, I look at the ten year real yield

0:16:27.200 --> 0:16:31.720
<v Speaker 2>two point one. Where is a rogue off normal ten

0:16:31.800 --> 0:16:32.760
<v Speaker 2>year real yield?

0:16:33.240 --> 0:16:37.080
<v Speaker 3>Well, it's it's a very volatile it probably think of

0:16:37.160 --> 0:16:41.040
<v Speaker 3>one to five is where it'll settle after all of this.

0:16:41.440 --> 0:16:44.120
<v Speaker 3>I mean it'd gone to minus one. There is a

0:16:44.440 --> 0:16:49.040
<v Speaker 3>slight trend, although it's a little bit hard to know

0:16:49.080 --> 0:16:53.080
<v Speaker 3>if it's up or down. What was so like crazy

0:16:53.400 --> 0:16:56.800
<v Speaker 3>after the financial crisis is the ten year that you're

0:16:56.840 --> 0:17:00.920
<v Speaker 3>looking at the real inflation of trusted interest rate. It

0:17:00.960 --> 0:17:04.480
<v Speaker 3>fell by more than three hundred basis points, even three

0:17:04.560 --> 0:17:08.840
<v Speaker 3>hundred and fifty basis points. And that's when Larry Summers

0:17:08.840 --> 0:17:12.320
<v Speaker 3>came out with secular stagnation. We're never going to grow

0:17:12.400 --> 0:17:14.399
<v Speaker 3>again the interest rate, it's always going to be low.

0:17:14.840 --> 0:17:18.600
<v Speaker 3>And all this stuff about debt is a free lunch

0:17:18.720 --> 0:17:23.600
<v Speaker 3>modern monetary theory. I argued way back when it was

0:17:23.640 --> 0:17:27.680
<v Speaker 3>happening that this is normal after a financial crisis. Don't

0:17:27.720 --> 0:17:30.160
<v Speaker 3>think that this is going to last forever. It happened

0:17:30.200 --> 0:17:33.600
<v Speaker 3>in the great depression, interest rates collapse. It happens in

0:17:33.640 --> 0:17:37.160
<v Speaker 3>many countries in the in the aftermath of a financial crisis.

0:17:37.720 --> 0:17:40.200
<v Speaker 1>So I mean a lot of what's going on.

0:17:40.720 --> 0:17:44.920
<v Speaker 3>It's I think the most that chart you're looking at,

0:17:45.680 --> 0:17:48.120
<v Speaker 3>it's only one way to capture the real interest rate.

0:17:48.160 --> 0:17:50.920
<v Speaker 3>Their others, But I think it's the most important variable

0:17:51.320 --> 0:17:54.480
<v Speaker 3>in the world if you believe that it's going to

0:17:54.520 --> 0:17:55.920
<v Speaker 3>stay on the higher.

0:17:55.520 --> 0:18:00.360
<v Speaker 1>Side, as I do. You know, debt is very hot and.

0:18:00.359 --> 0:18:04.120
<v Speaker 3>It does gradually push up interest rates. The whole world,

0:18:04.520 --> 0:18:10.880
<v Speaker 3>for better or for worse, is remilitarizing. Populism. Deglobalization, which

0:18:10.960 --> 0:18:14.520
<v Speaker 3>we discussed earlier, also pushes up interest rates.

0:18:15.040 --> 0:18:16.200
<v Speaker 1>All of these things.

0:18:16.480 --> 0:18:19.879
<v Speaker 3>I think we could easily see the ten year at

0:18:19.880 --> 0:18:22.320
<v Speaker 3>that now I'm talking about the nominal, which is now

0:18:23.160 --> 0:18:26.440
<v Speaker 3>four something like that. We could see it at five, five,

0:18:26.800 --> 0:18:30.600
<v Speaker 3>six within a couple of years. Given how things are going.

0:18:31.200 --> 0:18:35.520
<v Speaker 3>There are some very smart people, young economists, who think, nope,

0:18:35.680 --> 0:18:39.320
<v Speaker 3>this is a aberration, We're going to go back on

0:18:39.359 --> 0:18:43.520
<v Speaker 3>that downward ride, and debt is a free lunch after all.

0:18:44.000 --> 0:18:47.320
<v Speaker 3>That seems to me a very risky thing to bet

0:18:47.320 --> 0:18:47.879
<v Speaker 3>the farm on.

0:18:48.080 --> 0:18:50.040
<v Speaker 4>Well, that's I mean, Professor that's what a lot of

0:18:50.080 --> 0:18:51.960
<v Speaker 4>folks will come into the studio and tell Tom and

0:18:52.000 --> 0:18:56.640
<v Speaker 4>me that, Hey, as long as investors, both domestic and international,

0:18:56.680 --> 0:19:00.320
<v Speaker 4>continue to show up and buy us treasure securities, nothing

0:19:00.359 --> 0:19:02.480
<v Speaker 4>to worry about. How do you respond to that?

0:19:02.560 --> 0:19:07.639
<v Speaker 3>But let's not confuse that with what interest rate they want. So, yes,

0:19:07.720 --> 0:19:11.920
<v Speaker 3>the market's liquid, but the interest rate we're paying, it's

0:19:11.960 --> 0:19:14.280
<v Speaker 3>been rising, and I predicted it's going to keep rising.

0:19:14.440 --> 0:19:18.480
<v Speaker 3>We're not going to have an Argentina situation. We may

0:19:18.680 --> 0:19:21.760
<v Speaker 3>commit Harry, Harry, you know somehow and refuse to pay

0:19:21.840 --> 0:19:25.440
<v Speaker 3>a debt. We can always inflate, we can use financial repression.

0:19:26.040 --> 0:19:30.280
<v Speaker 3>My book discusses the stuff at length. Any country that

0:19:30.760 --> 0:19:35.359
<v Speaker 3>prints its own money doesn't need to default, sorry about

0:19:35.400 --> 0:19:37.080
<v Speaker 3>my coughing, doesn't need to default.

0:19:37.119 --> 0:19:39.720
<v Speaker 1>But of course inflation is a form of default.

0:19:40.240 --> 0:19:43.720
<v Speaker 3>We had an excess ten percent inflation the last few years,

0:19:43.720 --> 0:19:47.600
<v Speaker 3>maybe twelve, and that was a partial default on us

0:19:47.680 --> 0:19:51.040
<v Speaker 3>dead in real terms. So I actually think we're going

0:19:51.119 --> 0:19:53.840
<v Speaker 3>to get something like that or even a little bigger

0:19:54.400 --> 0:19:58.119
<v Speaker 3>over the certainly the next five to seven years is

0:19:58.119 --> 0:19:59.200
<v Speaker 3>what I say in my book.

0:19:59.680 --> 0:20:02.880
<v Speaker 1>I maybe would pull it back to four years now.

0:20:02.720 --> 0:20:05.959
<v Speaker 3>That I've seen the opening salvos of the Trump administration.

0:20:06.240 --> 0:20:08.000
<v Speaker 2>Ken, at the time, we've got left, I got eight

0:20:08.040 --> 0:20:10.439
<v Speaker 2>ways to go here. You've been more than generous this morning,

0:20:10.520 --> 0:20:13.200
<v Speaker 2>canceling all your classes, and they got you know, I

0:20:13.280 --> 0:20:15.680
<v Speaker 2>want to talk about X ten and what Furman's doing

0:20:16.080 --> 0:20:17.960
<v Speaker 2>up at Harvard. I want to talk about the state

0:20:17.960 --> 0:20:20.919
<v Speaker 2>of Western New York as a wasteland of a former

0:20:21.000 --> 0:20:24.480
<v Speaker 2>industrial might. I got other things to talk about. Ken.

0:20:24.800 --> 0:20:26.800
<v Speaker 1>When you look at American.

0:20:26.280 --> 0:20:31.800
<v Speaker 2>Exceptionalism in the path of our decades and the path forward,

0:20:32.560 --> 0:20:37.480
<v Speaker 2>do you see a continued American exceptionalism after whatever the

0:20:37.600 --> 0:20:39.680
<v Speaker 2>tenure is of President Trump.

0:20:40.280 --> 0:20:44.960
<v Speaker 3>I think it was fading somewhat already in some dimensions,

0:20:45.000 --> 0:20:48.160
<v Speaker 3>but peaking in others. I think we've hit the peak,

0:20:48.359 --> 0:20:50.359
<v Speaker 3>and I think you know.

0:20:50.440 --> 0:20:50.840
<v Speaker 1>I don't.

0:20:50.880 --> 0:20:53.520
<v Speaker 3>I'm not an investor, but I would say this is

0:20:53.560 --> 0:20:57.640
<v Speaker 3>a moment to think about diversification more. I see Europe

0:20:57.680 --> 0:21:02.600
<v Speaker 3>with its forced remilitarization, with its catch up, probably doing

0:21:02.800 --> 0:21:07.120
<v Speaker 3>outperforming the United States. China not so much, but it's

0:21:07.119 --> 0:21:10.840
<v Speaker 3>going to break away from the United States. Thank you

0:21:10.920 --> 0:21:14.119
<v Speaker 3>for mentioning Western New York as a wasteland, because I

0:21:14.119 --> 0:21:17.120
<v Speaker 3>actually talk a lot about our joint hometown of Rochester

0:21:17.359 --> 0:21:18.320
<v Speaker 3>quite a bit in the book.

0:21:19.119 --> 0:21:21.639
<v Speaker 1>But I see.

0:21:22.920 --> 0:21:27.600
<v Speaker 3>Certainly the dollars staying on top, but less on top.

0:21:27.880 --> 0:21:29.080
<v Speaker 1>You mentioned Barry Ikinbreen.

0:21:29.160 --> 0:21:31.840
<v Speaker 3>I mean he wrote and many of us thought twenty

0:21:31.920 --> 0:21:35.119
<v Speaker 3>years ago that we were headed to a more tripolar world.

0:21:35.640 --> 0:21:38.840
<v Speaker 3>I think we're back on course to that. We'll lose

0:21:38.880 --> 0:21:42.640
<v Speaker 3>some of our exceptionalism. It will hurt in national security too.

0:21:43.359 --> 0:21:47.440
<v Speaker 3>There will be other pathways to do transactions. Our sanctions

0:21:47.480 --> 0:21:50.440
<v Speaker 3>won't be as effective, our spying won't be.

0:21:50.400 --> 0:21:52.800
<v Speaker 1>As effective, and a number of other things.

0:21:52.840 --> 0:21:55.320
<v Speaker 3>I think Americans are going to happen to adjust, but

0:21:55.400 --> 0:21:57.200
<v Speaker 3>I think we're going to have a bit a crisis

0:21:57.240 --> 0:22:00.720
<v Speaker 3>of some sort. First, there's no politician and can rent

0:22:00.760 --> 0:22:03.160
<v Speaker 3>it in Until we do that, have one.

0:22:03.160 --> 0:22:06.120
<v Speaker 2>Ket I've failed. We didn't talk about bitcoin in your

0:22:06.160 --> 0:22:09.440
<v Speaker 2>magisterial The Curse of Cash. You got to come back

0:22:09.480 --> 0:22:12.120
<v Speaker 2>at some point here in two thousand and twenty five

0:22:12.160 --> 0:22:14.960
<v Speaker 2>and give us an update on your classic book on

0:22:15.359 --> 0:22:19.520
<v Speaker 2>what I'll call your cryptic book on Crypto, Kenneth rug Off,

0:22:19.520 --> 0:22:23.880
<v Speaker 2>my book of the summer in Economics, Our Dollar, Your Problem.

0:22:23.920 --> 0:22:25.440
<v Speaker 2>For those of you in radio, I'll get it out

0:22:25.480 --> 0:22:30.879
<v Speaker 2>on Twitter and on LinkedIn. Today it is a celebration

0:22:31.040 --> 0:22:36.480
<v Speaker 2>of his academics for decades and also a piercing look

0:22:36.600 --> 0:22:37.320
<v Speaker 2>forward to our debt