Economist Kenneth Rogoff believes that the current lack of worry over the global government debt crisis will make future scholars question our wisdom.
In an editorial for the FT, Rogoff cited his and Carmen Reinhart’s research that said debt-to-income ratios are near postwar highs across economies and if interest rates rise sharply many countries will experience problems.
Rogoff says our lack of worry today will look “foolish” in the future, when debt problems come to roost. He suggests we streamline our tax system and contain entitlement spending to fight this future, and described our current tax systems as “Byzantine labyrinths funnelling money to powerful interests, creating staggering inefficiencies.”
Rogoff’s comments echo previous research he has done, that shows countries where the debt to GDP percentage rises above 90% experience economic slowdowns. The fears he elucidates, about rising debt yields slamming countries with high debt levels, aren’t too different from the arguments made by Niall Ferguson or Societe Generale’s Dylan Grice.
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