Rogoff (2)

A few more gems from the rest of the interview:

• The needed re-regulation of the global economic system will eventually happen, but not for another 4-5 years
• The US will end up with another $8-10 Trillion in debt (on top of our existing $11 Trillion), prompting a '1970's-style' bout of near-hyperinflation to reduce it. Not as bad as Germany after WWI, but pretty darn bad. Rogoff points out that he's only saying this because, again, this is a once in 100 years event, and the aftermath is gonna be ugly for a while
• Most large US financial institutions will need to go through 'some sort of accelerated bankruptcy', and the sooner the better. The longer the Obama administration delays this, the worse things will become, and the greater the risk of 'recessions for a decade' as in Japan. We have to 'face the music', and now.
• This mess will prompt a necessary and long-overdue re-evaluation of American values and consumption at the household level (something your faithful correspondent has long been forecasting...)

Do yourself a favor and take the 20 minutes to view the whole thing. Here's the link again: http://www.pbs.org/now/shows/511/index.html

And read his paper (with Carmen Reinhart) on the aftermath of financial crises (previously recommended): http://www.economics.harvard.edu/faculty/rogoff/files/Aftermath.pdf

Next time you hear Cramer, Kudlow, Luskin and all the rest of trained seals on CNBC et al, keep the much-better-informed Rogoff in mind

Kenneth Rogoff sure hasn't turned bullish

See his interview on PBS, previewing the upcoming G-20: http://www.pbs.org/now/shows/511/index.html

I bet you don't see Prof. Rogoff on CNBC anytime soon. He's about as bearish and chilling as one can possibly get, including our pal Roubini. And Rogoff's credentials are impeccable - ex-chief economist at the IMF, current Harvard professor. Just listen to the first 5 minutes or so, if you can bear it. A few highlights:

• This is a 'mammoth global recession'
• Banks in Europe have debts equal to 3-5x their national incomes and 'cannot possibly be guaranteed'
• "It's hard not to get angry" about the 'intellectual failures' of the recent 'gilded age' in which we thought 'the US is special and it can't happen here'
• This is a 'once in one hundred years' event
• Will be over in the US in 'four to five years', but wealth and living standards will be more like '20 years ago'
• We're 'driving down the tracks of a super-deep financial crisis'
• No one really knows what to do about it. The G-20 is still 'sorting things out'
• US unemployment will peak at 11-12%
• Housing won't hit a bottom for another 2 years
• Same with equities
• Expect large social and political changes starting next year, as folks realize 'how bad it is'. In "civil countries" (eg the US) this will be wrenching enough, but in others (China, Russia, Latin America...) there's the 'frightening prospect' that things could get 'very ugly'

Whew. Even I get bummed by all this, and I'm super used to it. If you're gonna watch the interview, do it in the evening with a stiff drink nearby, or some green tea, or some sedatives....