Kenneth Rogoff: belief

Transcript context

…The fiscal versions of political business cycle theory — they don’t have to fool anyone. You do get the money, and society as a whole has to pay it back, but you can come out ahead. There’s another, I’m going to just translate it a little bit from my model, one that my late colleague, Alberto Alesina, did, and a number of others, that said part of the reason debt keeps piling up is we have the liberal party and the conservative party. When the liberal party is in power, they know that debt is bad, but they know they can spend now. They know they might not control it in the future, so they spend a lot and they borrow. When the conservatives are in power, they cut taxes and build up the debt. I think that’s a very, very powerful theory of part of why debt builds up is, whoever is in power says, “Don’t pay any attention to it. ” Of course, I think we end up where we are now. In an earlier book, you called for phasing out of currency and large denomination bills. Do you still want to do this?…

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