Kenneth Rogoff: evaluation

Transcript context

…When you say big inflation, how big is big? Last time we probably had a bonus 10 percent inflation over the 2 percent target cumulatively, maybe 12 percent. I think this time, it’ll be more on the order of cumulatively over the 2 percent target, 20 percent, 25 percent. There’s going to be an adjustment. I don’t think the debt is going to be the sole contribution to that. There are many factors. You have to impinge on Federal Reserve independence. Probably, there’ll be some shock, which will justify it. I don’t know how it’s going to play out. I know that for years, people have said the US debt is unsustainable, but it hasn’t come to roost because we’ve lived through this post-financial crisis, post-pandemic era of very, very low and negative real interest rates. That is not the norm. There’s regression to mean. You know what? It’s happened. Suddenly, the interest payments start piling up. I think they’ve at least doubled over the last few years. They’re quickly on their way to tripling, of going up to $1 trillion. Suddenly, it’s more than our defense spending. That’s the most important macro change in the world, that real interest rates appear to have regressed more towards long-term trend. What’s the most plausible scenario you can imagine where the US does not have to make any major adjustment? I’m not saying you’re predicting it. I’m not saying you think it’s very plausible, but you have to come up with something. What is it?…

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