Speaker 1: Bloomberg Audio Studios, podcasts, radio news. My book of the
Speaker 1: summer hugely successful for Ken Rogoff was Our Dollar Your Problem.
Speaker 1: I put it out last night. Is a summary along
Speaker 1: with Rick Atkinson's wonderful second volume on the American.
Speaker 2: Revolution, The Rogue Off Revolution.
Speaker 1: As he has done with Carmen Reinhardt a decade ago
Speaker 1: and through his career, is to consider our debt, our deficit,
Speaker 1: our battle with austerity. Professor Rogoff joined some Harvard this morning. Ken,
Speaker 1: thank you so much. Congratulations on the book. Give us
Speaker 1: an anecdote, Ken of the success of the book. I
Speaker 1: want every economic student to read it.
Speaker 3: Are they? Oh, as people are starting to read it,
Speaker 3: they're really enjoying it. I'm getting all kinds of emails, letters,
Speaker 3: not to mention countless reviews where people has sort of
Speaker 3: been surprised that it's so fun to read. It's great.
Speaker 1: At Lisa noted that Grace Slick is in the early pages.
Speaker 2: He's got Jeff in there early.
Speaker 1: Okay, Ken Project Syndicate A blistering essay Foreign Affairs Magazine,
Speaker 1: A blistering essay. This time is different? Are we finally
Speaker 1: unraveling our debt and our deficit?
Speaker 3: To crisis. Well, in my book, I thought it would
Speaker 3: take five to seven years. On the current track, we
Speaker 3: are I think Trump, as you said earlier, as an accelerant.
Speaker 3: You know, it's certainly not a sure thing. A lot
Speaker 3: of it goes around what are the underlying interest rates
Speaker 3: if we go back to the zero interest rates, real
Speaker 3: interest rates of the twenty tens up through twenty twenty
Speaker 3: two in the pandemic. Well, sure, debt is a free lunch.
Speaker 3: I mean you can spend and you basically don't have
Speaker 3: to pay anything. That's what all the I call them
Speaker 3: to Austerians were absolutely convinced, and some very smart people
Speaker 3: you had them on your program, followed this. I mean
Speaker 3: there was Larry Summer's secular stagnation. He's very nuanced about it.
Speaker 3: To be fair, Olivier Blanchard, president of the American Economic Association,
Speaker 3: said we shouldn't look at debt anymore. Paul Krugman, you know,
Speaker 3: wrote constantly about this. But what do you know? Interest
Speaker 3: rates have gone up, and the big question is are
Speaker 3: have we normalized or is this just something after the pandemic.
Speaker 3: I think for many reasons. If you look at the
Speaker 3: history of real interest rates, they're probably about where they're
Speaker 3: going to be for a long time, in which case
Speaker 3: we are in trouble. So that's that's a long winded answer,
Speaker 3: But it's really about interest rates, not just about that.
Speaker 1: I want to get this in on interest rates. Paul's
Speaker 1: got eight questions he wants to jump in here. But
Speaker 1: the answer, Ken Rogue is I'm auditing X ten with
Speaker 1: Jason Furman, did a fancy logarithmic thirty year bond. We
Speaker 1: get to the Ken Rogoff six percent thirty year bond,
Speaker 1: Paul late next year, like autumn of next year. Ken,
Speaker 1: do you still model a six percent yield for the
Speaker 1: United States of America?
Speaker 3: Well, I think a six ten year treasury is more
Speaker 3: likely than one in three quarters treasury that we had
Speaker 3: for a long time. Absolutely. I mean, it's very hard
Speaker 3: to predict interest rates, but I think they're as likely
Speaker 3: to go up as down.
Speaker 4: Professor. I've been in this market since for thirty five years,
Speaker 4: and we've been talking about the national debt and deficits
Speaker 4: every single year. Yet nothing changes. And I guess I've
Speaker 4: been told by others that say, hey, as long as
Speaker 4: people continue to buy our treasury bonds, we're okay. How
Speaker 4: do you think about that?
Speaker 3: The question is at what price? We've gone through this
Speaker 3: period where interest rates have gone down and down and down,
Speaker 3: and our debt, you know, has gone up from maybe
Speaker 3: thirty percent of GDP in nineteen eighty to sixty percent
Speaker 3: to ninety percent to over one hundred and twenty percent,
Speaker 3: and the interest rates had been coming down until they didn't.
Speaker 3: And if you look at history, there have been long
Speaker 3: periods where interest rates were rising where they're in decline,
Speaker 3: and I think they're in a period where they're normalizing.
Speaker 3: So people were too focused on debt and not looking
Speaker 3: enough at well, what's the interest on the debt? That's
Speaker 3: what's changed.
Speaker 4: What do you what would you if you were sitting
Speaker 4: in Congress and you had a couple of folks on
Speaker 4: both sides of the aisle with you, what would you
Speaker 4: suggest they do to address this issue?
Speaker 3: Well, why don't you at least give a try to
Speaker 3: running a two to three percent deficit instead of a
Speaker 3: six or seven percent deficit? You know, while you organize,
Speaker 3: I mean, you know, the solutions are well known. You
Speaker 3: could improve the tax system, their ways to make it
Speaker 3: more efficient. We don't have a very efficient system. Would
Speaker 3: be the Understatement of the year. You know, they're all
Speaker 3: kinds of suggestions for improving growth, but I think sort
Speaker 3: of a sober thing to do would be to at
Speaker 3: least not run what we call a primary deficit, means
Speaker 3: above and beyond the interest payments, which right now are
Speaker 3: about three percent of GDP.
Speaker 1: I just want to drop in here with an important
Speaker 1: announcement separate from Ken Rogoff, and we're thrilled you're listening
Speaker 1: to us across the nation today and indeed around the
Speaker 1: world and in a fractious United Kingdom. Angelo Rayner resigns
Speaker 1: is US Deputy Prime Minister. I'm not going to go
Speaker 1: into the nuances because they don't understand it, but there
Speaker 1: has been an uproar and the Labor Party wrapped around
Speaker 1: the Deputy Prime Minister. She resigns and also will resign
Speaker 1: various posts at the Labor Party as well. So that's
Speaker 1: breaking news in the United Kingdom. What perspective you as
Speaker 1: we can we continue with Kenneth rowg Golf, Paul, why
Speaker 1: don't you pick it up with Professor Rogoff.
Speaker 4: So Ken as we think about just kind of global
Speaker 4: economic growth here and we've got we're now in a
Speaker 4: world of teriffs, reciprocal tariffs, all kinds of barriers going
Speaker 4: up the global trade. As you step back and look
Speaker 4: at it from in a thirty thousand foot level, what
Speaker 4: does that mean to you for kind of global economic growth?
Speaker 3: Well, I think near term, you know, the growth has
Speaker 3: held up better than anyone would have guessed with all
Speaker 3: this noise going on. That's been a surprise. Now we
Speaker 3: may find you're getting the labor data today and you
Speaker 3: know it wasn't as good as we thought it was.
Speaker 3: It's hard to know what's going on. I might interject.
Speaker 3: You know, labor data, Johns Day's always been the big
Speaker 3: number because it's the most reliable number that we get
Speaker 3: sort of in real time. Maybe now and going forward,
Speaker 3: it's not going to be considered as reliable. And I
Speaker 3: don't know what we're going to look at.
Speaker 1: Can I look at your book? And I want to
Speaker 1: bring this back, folks to a summary of all the
Speaker 1: crises across Ken Rogoff's Young Academics is just it's amazing
Speaker 1: shows up for a job interview in a polyester suit?
Speaker 2: How did that go?
Speaker 3: Ken Rogoff?
Speaker 1: You showed up in early in the book Young rogueoff
Speaker 1: chess guy, shows up in a polyester suit.
Speaker 2: How did that go?
Speaker 4: Ken?
Speaker 3: It was my Rhodes Scholarship interview, and I had just
Speaker 3: never worn a suit. I never bought a suit. I
Speaker 3: didn't know what it looked like. So I had this
Speaker 3: sort of it was really beautiful colors, you know, I
Speaker 3: looked like I was probably some kind of entertainer. And
Speaker 3: everyone who was else was wearing gray blue suits. And
Speaker 3: I tie it in later to when I go to
Speaker 3: Poland playing in a chess tournament and I'm describing how
Speaker 3: they their suits are awful because they have, you know,
Speaker 3: centralized planning, and they're looking at my suit and say,
Speaker 3: oh my gosh, do all Americans have such great suits?
Speaker 1: Can I look at our dollar problem and it speaks
Speaker 1: of crisis just as a general statement, and I'll let
Speaker 1: your work off it. How close are we to the
Speaker 1: collective fears of global Wall Street of August nineteen ninety eight,
Speaker 1: the unraveling of various em crises Ecuador, Mexico, and the
Speaker 1: rest or something tangible like the IMF bailout of the
Speaker 1: UK many decades ago.
Speaker 3: Well, there are lots of small countries in crisis, in fact,
Speaker 3: way more than in a long time. I mean, the
Speaker 3: World Bank reported that almost half the developing and low
Speaker 3: income countries were basically in default. We have the Sri Lanka's,
Speaker 3: there's always Argentina, Lebanon. I mean, there's all kinds of
Speaker 3: countries that are in trouble. I should say Argentina is
Speaker 3: doing much better now, but of course it has a
Speaker 3: very big debt problem. Those often are the Canarya and
Speaker 3: the coal mine for when something larger happened. If you
Speaker 3: go back to the nineteen eighty three debt crisis, that
Speaker 3: was really you know, the Latin American debt crisis the
Speaker 3: last decade. Actually, if you go earlier, before Mexico, Brazil
Speaker 3: and everyone else, there were a lot of small countries.
Speaker 3: So when you have interest rates high, this much volatility
Speaker 3: going on, very high debt everywhere, it's you know, like
Speaker 3: a forest that's very dry and something can set it off.
Speaker 3: But it you know, I don't know what it would be.
Speaker 3: It would not surprise me if we did have a
Speaker 3: major country run into big problems, which could run anywhere
Speaker 3: from you know, a Latin American country to Japan over
Speaker 3: the coming year.
Speaker 4: Ken given kind of that uncertainty, global uncertainty, this Federal
Speaker 4: Reserve is really in a tight spot here, and not
Speaker 4: to mention the political pressures on this federal reserve. What
Speaker 4: do you make of the kind of how the Fed's
Speaker 4: kind of been working here the last several months, and
Speaker 4: maybe what it to do over the coming months.
Speaker 3: Well, the big call is actually not whether to take
Speaker 3: the SHORTERM interest rate down half a percent or a
Speaker 3: quarter percent, or when to do it. The big call
Speaker 3: is where are we headed. If we're headed back to
Speaker 3: these very low interest rates, which some very smart people think,
Speaker 3: I mean, this is a debate, then they have a
Speaker 3: lot of room to cut without triggering inflation. They'd sort
Speaker 3: of be moving the market to where it should be.
Speaker 3: On the other hand, if that's not the case, which
Speaker 3: I believe, and I think by and large the Fed
Speaker 3: staff is very skeptical of the lower forever review, then
Speaker 3: they need to be cautious. It's so hard to read
Speaker 3: the data. The combination of Trump, AI and everything makes
Speaker 3: it very hard to know what's going on.
Speaker 1: You can comment, honey, are singing and this is of
Speaker 1: course we're with Jorgensen at Harvard and many other giants.
Speaker 1: I'm going to call it, folks, the dynamics of productivity
Speaker 1: and there's a school Ken down the street where I
Speaker 1: think they came up with total factor productivity. I can't
Speaker 1: remember quite but Ken on productivity. The great theme of
Speaker 1: our liberal state is productivity and technology to the rescue.
Speaker 2: Do you observe that or is that over emphasized? Well,
Speaker 2: it's certainly not overemphasized. It's very important. It's sort of
Speaker 2: hard to know how to make it come and how
Speaker 2: to make it go away. I think Wall Street obviously
Speaker 2: has been very excited about AI their air pockets, where
Speaker 2: the productivity has been very clear. I do think some
Speaker 2: of what we're seeing in the high Wall Street prices
Speaker 2: reflects labor share falling, profits and businesses share rising, which
Speaker 2: means it isn't growth. It isn't all growth. Some of
Speaker 2: it's just a reallocation that has very different political implications.
Speaker 1: Of course, Ken, congratulations on my book of the Summer.
Speaker 1: I just can't say enough, folks. Whatever smart ale kid
Speaker 1: you've got, I don't care how they're smart, Like Roguoff,
Speaker 1: they're dumb li king. The answer is cover to cover
Speaker 1: two hundred pages, our dollar, your problem. It is the
Speaker 1: arc of Ken Rogoff's career and the view for it
Speaker 1: as well. Kenneth Rogoff, Harvard University,