Kenneth Rogoff: belief

Transcript context

…Why isn’t it easy for a lot of countries? Say you’re Barbados. That’s a small country. Most of your visitors are from the US also. Your banking system — you can just buy external insurance. There’s an insurer that can cover the Barbados banking system if need be. Buy it from China if you have to, and then just dollarize. Why aren’t they just better off? I’m being naive, but is there an insurer who’s going to bail out the Barbados banking system? I think our regulators would make that difficult. Their regulators would make it difficult. You would need to have something like that, and there’re a lot of moral hazards. If you’re going to be an insurer, you can’t just insure. You have to have 150 people on shore looking at them all the time. It’s not easy to do. The only country in the world, really, which can bail out its banking system is Hong Kong. They have enough dollar reserves to bail out everything. That’s the problem with dollarization is that, if you’re not going to have banks, it’s great, but we want to have lending and mortgages and car loans and stuff, and it’s very easy to run into trouble. Why did Japan never have a financial crisis? Very high debt to GDP ratio. Growth rate is mostly slow. In per capita terms, it’s not as bad as it sounds at first, but nothing gangbusters. How have they held on?…

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