This post by Gavyn Davies has been cross-published at Gavyn’s own blog.
The work of Carmen Reinhart and Ken Rogoff (RR) on public sector debt ratios, and their relationship with GDP growth, has been extraordinarily influential in academic and policy circles since 2010. Before this week, their statistical analysis, based on a 200-year database which they had painstakingly assembled covering dozens of countries, had appeared to establish an important stylised fact: that debt ratios above 90 per cent were associated with much lower rates of GDP growth than debt ratios under 90 per cent. The sudden drop in growth at a debt ratio similar to that reached in many developed economies acted as a wake up call to governments and encouraged the adoption of austerity programmes. Read more
It seems more top-tier economists are coming around to the idea that robots and technology could be having a greater influence on the economy (and this crisis in particular) than previously appreciated. Paul Krugman being the latest.
But first a quick backgrounder on the debate so far (as tracked by us). Read more
Rogoff and Shuttleworth versus Theil and Kasparov at the Oxford Martin School. While the video is from November, we felt the need to review it given Rogoff’s op-ed on Tuesday covering the same subject.
Rogoff’s argument, which in part is intended to counter Robert Gordon’s ‘no robots’ thesis, is that… Read more
Right, everyone has weighed in on the US recovery debate. Martin Wolf got in on the act on Wednesday arguing that and his voice has now been added to a plethora of others (see the ‘Related Links’ below if you want to catch up and a recent paper by Citi’s Sheets and Sockin which we’ve thrown in the usual place) with a consensus building on the R&R side of the argument.
Schularick and A Taylor have already weighed in on the US issue but where it gets fun now is that they have come back with a UK update (with our emphasis): Read more
We’ll keep this short, with a hat-tip to Barry Ritholtz. Reinhart & Rogoff, the doyens of financial remembrance, are back with a new paper and a Bloomberg piece containing some entertaining irritation.
Their main aim is…
to dismiss the misconception that the U.S. is somehow different. The latest financial crisis, yet again, proved it is not.
But they happily took some time to single out a few people who are guilty of “gross misinterpretations of the facts” too . Read more
The Oregon Office of Economic Analysis has ventured an update to Carmen Reinhart and Ken Rogoff’s ‘This Time it’s Different‘, the seminal work on financial crises of the past – and their related analysis on the aftermath of financial crises.
The OOEA* uses both updated and revised data and, mostly, confirm that while things have of course gotten worse, they’re still inside the historical norms. For example, equity price declines: Read more
Here’s an interesting view.
Is the search for yield getting in the way of all rational sense in the market? Read more
Last April we attempted to grade sovereign sustainability risks across the major economies.
No surprise the laggards were (starting from worst) Greece, Ireland, Portugal, and Spain. Read more
We’re not known for our sunny disposition here at FT Alphaville, but it would be rude not to point out an uplifting message when one catches our eye. So, over to the Aid Watch blog (of all places)…
Drawing upon the lessons of This Time is Different, the magisterial history of financial crises written by Carmen Reinhart and Kenneth Rogoff, economist William Easterly concludes that “if financial crises are so common and the world keeps growing anyway, then they must not be so damaging in the long run.“ Read more
Day 475 in the Big Economist House.
10:19 am Read more
The Reinhart/Rogoff orthodoxy of the moment tells us that yawning government deficits lead to years of sub-par growth as a big dose of austerity is applied in order to balance the books. Read the authors of This Time is Different on the subject or check with Bill Gross.
But Tim Bond of BarCap is having none of it. Read more
“Throughout history, rich and poor countries alike have been lending, borrowing, crashing and recovering their way through an extraordinary range of financial crises….”
That quote comes from Carmen M Reinhart and Kenneth Rogoff’s book “This time is Different – Eight Hundred Years of Financial Folly”. Read more
And in Latvia’s case, from your own central bank if necessary. As Reuters reports on Monday (our emphasis):
FRANKFURT, June 29 (Reuters) – The European Central Bank has urged Latvia to rethink plans to siphon off half of its central bank’s profits to help rebuild the country’s battered finances. Latvia’s government plans to up the amount of central bank profits it takes, to 50 percent from the current 15 percent.
With the IMF’s special drawing rights firmly on the table as the means for some sort of world helicopter cash drop or the basis of new global reserve currency, it’s probably worth pointing out how they might feature in the IMF’s radical overhaul in lending procedures as announced on Tuesday. As Reuters reports:
WASHINGTON, March 24 (Reuters) – Changes in the way the International Monetary Fund lends to countries will apply to countries with existing programs and those currently in talks with the IMF, a senior Fund official said on Tuesday. The IMF approved a major overhaul of its lending framework on Tuesday and said it would streamline loan conditions, simplify costs, and increase access to resources. Addressing a news conference Reza Moghadam, director of the IMF’s strategy, policy and review department, said changes in loan conditions will apply as of May 1, while increases in resources will be effective immediately, and a new charging system will be implemented from August 1.
The changes to the IMF’s lending framework include: Read more
European Union ministers are reportedly going to back a call from the IMF to double its funds to $500bn when they meet at this weekend’s G20 meeting in London.
Raising funds, of course, could be done in two ways. One is simply by borrowing more from institutions already subscribed to the fund. The second, according to some commentators, is to boost the fund’s general allocation of special drawing rights (SDRs), the IMF’s own currency – a kind of global-scale quantitative easing. Read more
CMBS has long been speculated about as the next mortgage-backed penny to drop. Until recently, though, prices have -relatively speaking – held up quite well.
Here, however (HT Calculated Risk) is the latest CMBX chart from Markit (AA series 5): Read more
Nouriel Roubini? Nah. Kenneth Rogoff.
The former IMF chief economist was speaking at a conference in Singapore on Tuesday, warning of much more pain to come. As he told Reuters: Read more