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The Spectacle Blog
Republicans cite Kenneth Rogoff, or at least Rogoff’s ideas, constantly. Rogoff is the Harvard economist who, with Carmen Reinhart, developed the thesis that debt greater than 90 percent of national income threatens the economy, a statistic that fiscal hawks love. Intentionally or not, Rogoff has provided important intellectual backing for any member of Congress who opposes deficit spending — if not for the 90 percent statistic, telling a story in which near-term deficits harm job creation is much more difficult.
It would be interesting to know how those congressmen who do lean on Rogoff’s findings would interpret his proposal for ending the recession [emphasis added]:
In my December 2008 column, I argued that the only practical way to shorten the coming period of painful deleveraging and slow growth would be a sustained burst of moderate inflation, say, 4-6% for several years. Of course, inflation is an unfair and arbitrary transfer of income from savers to debtors. But, at the end of the day, such a transfer is the most direct approach to faster recovery. Eventually, it will take place one way or another, anyway, as Europe is painfully learning.
Some observers regard any suggestion of even modestly elevated inflation as a form of heresy. But Great Contractions, as opposed to recessions, are very infrequent events, occurring perhaps once every 70 or 80 years. These are times when central banks need to spend some of the credibility that they accumulate in normal times.
He’s not exactly on the same page as the “sound money” crowd.
View all comments (18) | Leave a comment
More Blog Posts by Joseph Lawler
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Mike| 8.3.11 @ 6:03PM
Except for gas (but it is the driving season) and some, but not all, food, I am enjoying deflation.
Ken (Old Texican)| 8.3.11 @ 6:13PM
My blog a few days ago:
Governor Perry and Sarah Palin…dream ticket for prosperity
One thought I have is that we are going to desperately need a President who can COMMAND the “bully pulpit”!
We are going to need a President who can by sheer force of character, turn our country around.
Before proceeding further, I commend you to this speech by Governor Perry:
www.youtube.com/watch?v=dbWz1RYGE3Q
To my knowledge, that afternoon, Governor Perry came of age. He demonstrated to me that afternoon that he has “grown a pair”.
I would be very happy to see Governor Perry in the Whitehouse….. BUT I’m also sort of selfish. We need him here in Texas…and in the national Governors’ Chair.
You know, I look around and see medical doctors moving here, (To Texas), in droves. Just one example of a decent government allowing prosperity to happen, in spite of vested interests trying to stack the deck.
People often forget that many of those doctors are merely “small businessmen and women”.
Governor Perry and Sarah Palin would be the dream ticket.
C Bowen| 8.3.11 @ 6:41PM
Texas is a financial basket case.
http://www.usdebtclock.org/sta.....clock.html
WL| 8.4.11 @ 12:27AM
Uh...Sir???
Don't know if you were being sarcastic or trying to say it was bad but...
The GDP is going up...The debt Ratio is going DOWN...the Debt itself if going DOWN...the spending is going DOWN....The revenue is going UP...
How does that stack up against say....
California?
If you are being ironic and saying that Texas is acutally on the right track...then Disregard this next statement....
But if you are trying to say that they are somehow in doing bad under Perry...You really are a Dumba-s-s.
WL| 8.4.11 @ 12:28AM
Comment was directed at the guy who linked to the Texas debt clock...not the posting that supports Perry/Palin...
To the poster that supports Perry/Palin....RIGHT ON RIGHT ON RIGHT ON!!!!!!
Michael L. Hauschild| 8.3.11 @ 6:59PM
Palin, you betcha; but Perry......?
The hair of the Romney, the flip flop capability of Kerry, the party changing ability of Spector, and the Amnesty open border stance of Bush. Now I am one of those Tea Party guys, and trust me, he is a non-starter. Last week he wanted the gay marriage issue resolved by the states, today he wants a Constitutional Amendment.
Mike| 8.3.11 @ 7:43PM
Perry and Palin?
You're demented.
Thom| 8.3.11 @ 8:49PM
Ken, sounds like a man running for high office....
Clint| 8.3.11 @ 6:18PM
Inflation 2011:
Jan. 1.6
Feb. 2.1
Mar. 2.7
Apr. 3.2
May 3.6
Jun. 3.6
Clint| 8.3.11 @ 6:29PM
"The National Inflation Association - http://inflation.us - today released the following debt ceiling report to its NIA members:
NIA hasn't written about the whole debt ceiling issue over the past few weeks because in our minds it is completely irrelevant. Our elected representatives in Washington along with the mainstream media have been wasting thousands of hours of time and hundreds of millions of dollars debating a topic that has no meaning at all. The President, Senate, and House of Representatives are putting on a show to make it look like they care about cutting spending and balancing the budget. Except for a select few elected representatives like Ron Paul who care about protecting the U.S. Constitution and preserving what little purchasing power the U.S. dollar still has left, every other politician in Washington is putting on a complete charade in order to trick their constituents into believing there is a difference between the proposals from the Republicans and Democrats."
Michael L. Hauschild| 8.3.11 @ 7:02PM
"US borrowing tops 100% of GDP: Treasury"
http://news.yahoo.com/us-aaa-r.....40123.html
Thom| 8.3.11 @ 8:51PM
Michael, not that it really matters but our debt surpassed REAL GDP some time ago but what’s a trillion here or there to this discussion.
George S| 8.3.11 @ 7:32PM
Sounds easy (and tempting) to pay down real dollars with wheelbarrows full of paper. However, I do not think the Chinese will react too kindly -- may even treat it as an act of war. Nothing would bring China to its knees faster than stealing their money. Raising the debt ceiling was said to be a crucial blow to our national security. Not hard to see why.
Thom| 8.3.11 @ 9:07PM
It won't be just the Chinese that react badly at least in the sense of not loaning us any more money at dirt cheap rates.....Japan would be crippled by this too.
Thom| 8.3.11 @ 9:05PM
The biggest problem with Rogoff’s suggestion is that inflation (or deflation) can’t be turned on and off like a water tap. I got my first introduction to this concept in the early 70s and by the end of the 70s my standard of living had taken a net loss and I was paying twice the percentage in income tax due to bracket creep. Even today, with both Reagan and Bush 43 rate reductions, income tax brackets being indexed, I’m still paying more as a total percent with a home mortgage deduction on top that I did not have in the 70s. Inflation stimulated like he is suggesting also tends to be a self-fulfilling prophecy because people become conditioned to spend unnecessarily in order to beat constant price increases. The double digit inflation of the 70s became self-sustaining due to this and it took drastic measures to bring this under control. At the end of a decade of this incomes never caught up with prices and most people had no savings at all. Such theories only work in academic settings but in the wild they do what they do and it is usually a net loss for most.
Glein| 8.3.11 @ 11:29PM
I am going shopping for wheelbarrels so I can use them to take our soon to be worthless currency to the store to buy a loaf of bread.
north face online | 8.4.11 @ 4:35AM
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Charles R. Williams| 8.4.11 @ 11:19AM
2% inflation means I have a comfortable retirement even if they cut social security by 50%. 6% inflation means I will die in poverty, supported by the government.
Just who is over-leveraged. Not the corporations which are flush with cash. Will inflation help the banks? Their mortgages will be less likely to default (or mortgage backed securities) but the value of any asset that earns a fixed interest rate will plummet. Inflation means they will have to recapitalize sooner. Homeowners? Some of them will no longer be underwater after two or three years. Why is this better than default, renegotiation and/or foreclosure? Then there is sovereign debt. If these debts are inflated away, governments can spend more. Finally, inflation increases effective tax rates on business.