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