Kenneth Rogoff says that the US economy is in a “wild tour” now that Donald Trump has returned to the rate, and the dollar can go through the pressure.
The economist of Harvard University reported several demanding situations for a dollar -oriented consultation at the annual assembly of the World Economic Assembly in Davos, Switzerland, Tuesday.
Rogoff said that the concept that interest rates will fall is an “impossible dream at this stage. ” The Federal Reserve higher than its reference rate of almost 0 to 5. 5% within 18 months to restrict inflation after the pandemic, and only made them from a percentage point.
The former economist leader of the Inter Monetary Fund has generated the alarm of the US debt, which has tripled more than beyond two decades to more than 36 billion dollars.
“I think that the interest rates of debt construction,” he said, nodding with the concept that the federal government would possibly have to pay more interests in their obligations to continue attracting buyers and their festival with the personal sector and governments of the states and the facilities for the budget can also simply build rates.
Rogoff stressed the 1970s as an edifying history. The dollar “has lost a lot of territory”, while inflation has led Fed to develop rates to almost 20%. There may be similar benefits “if things are uncontrollable,” he warned.
The two American political parties “think that debt is a loose lunch,” Rogoff said, adding that the idea that they were “wrong” and that a result will be high rates.
A lot of record debt and a construction in the annual interest rates of the federal government, which exceeded $ 1 or more than its army budget last year, he said.
“At one point, this is one of the possible triggers to have more inflation,” Rogoff said. “The dollar will undermine” as it did in the 1970s, predicted, because there is “prospective for a lot of instability” of the battery of the United States debt.
Rogoff said they have an effect on Trump’s planned price lists on interest rates and global change rates are already taken to markets, but the way in which other countries retaliate.
Education said that Trump’s costs in the first mandate fed on inflation and if the rates were higher enough, and this can be reproduced, pushing the calendar for new rates falls.
Rogoff has also responded to considerations about politicians and minimizes in the domination of the dollar, because other countries explore the global reserve currency.
Greenback is very according to old standards, installing it to weaken due to a probable reversal to the average, he said.
Trump’s warnings to other nations to continue with man can also change. “I guess it’s not intelligent for the dollar; you need other people to use your currency,” Rogoff said. “If you are threatened, I think it only strengthens the incentive to verify to diversify to do other things. “
He also explained how the dollar has sensory moments of misery, such as the global monetary crisis and pandemic. Other nations to achieve the price of being in adequate food books and access to dollars.
However, Rogoff also warned that the strength of the dollar can be brief living: “Whoever is in the pedestal position around the world is online to have an accident to come. “
Rogoff wondered aloud if Davos participants can talk about the weakness of the dollar and the cave of the US economy in a few years.
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