Kenneth Rogoff: evaluation

Transcript context

…What is the mistake he and Oren Cass are making? The trade balance depends a lot on your savings and your investment, these macro-economic factors. If there’s an underlying problem — and to be fair, when your trade deficit’s really negative, there often is — it could be something. I think in the case of the United States, when it hit a real peak in 2005 to 2007, I thought there was a problem. I must say, I didn’t know until very close to the event, what was going on. We weren’t regulating well, but I didn’t even know what their point is, to be honest. There’s this mercantilist view. I want to collect all the gold in the world. We want to be able to buy things. Back in the day, you used to have to hire an army or navy to help fight off invaders and such, but today, that’s not so true. I think the current account deficit — that’s a broader measure of the deficit — it’s important, and if it’s really large, you can probably bet that it might go down, but it’s not something to try to wrestle to the ground. There’s an associated claim I hear, including from Martin Wolf, that China needs to substitute more into consumption to remedy some longer-term macroeconomic imbalance. I can see that, from a welfare point of view, the Chinese over-subsidize investment and might be better off consuming more, but is it going to boost their growth rate to consume more?…

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