Kenneth Rogoff spoke with CNBC today about the threat of sovereign debt crises today.
The Key Points:
- When countries hit gross government debt as 90-100% of GDP, problems are bound to arise.
- If countries go too long with stimulus it can leave them in a debt trap and with prolonged slow growth.
- The U.S. has been in ‘default’ before — when it went off the gold standard — and there is no reason why it won’t have problems again.
- Banking crises inevitably lead to sovereign debt crises as governments take on the debt.
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