The way the world looks at sovereign debt is “primitive” and the problems we face are “really profound,” according to Kenneth Rogoff. Speaking at George Soros’ Institute for New Economic Thinking conference at Bretton Woods, Rogoff dived into the world debt crisis.
- 3:15 There is still a massive debt overhang in the world, the U.S., Europe, Japan. Having worked on models of this it is amazing how primitive our political economy is in recognising this.
- 3:42 There aren’t any models for when the government is running into budget troubles that it shuts down for a while.
- 3:58 Debt is fundamentally a political economy problem. Who is bankrupt? Governments aren’t really bankrupt, they don’t pay because they don’t feel like paying or their system doesn’t feel like paying. How do you model that? What are the limits? What are the politics?
- 4:44 In a few hundred years from now I do sincerely believe we will have made a lot of improvements. For example the complexity of our tax systems, the way we do old-age pension funds which are schemes that would make Bernie Madoff blush.
- 5:00 Debt problems around the world are really profound. Government debt is at all-time highs and private debt is off the charts.
- 6:08 I think we will see defaults in europe and sovereign debt problems but it is not because these are insurmountable problems.
- 9:30 Robert Shiller has proposed having more innovative markets, more indexation and being less dependent on plain vanilla debt. I think he is far ahead of where the governments are.