Rogoff Sees No Double-Dip But Beginning of China Property `Collapse’
Kenneth Rogoff, a professor at Harvard University and former chief economist at the International Monetary Fund, talks with Bloomberg’s Susan Li i Hong Kong about the global economy and China’s real estate market and economy. Rogoff also discusses the outlook for European banks, the global economy and stimulus policies.
- Double dip is not his baseline scenario. "I wouldn’t say it’s an elevated risk" is how Rogoff puts it. The global economy is experiencing a slow U-shaped recovery as he contends he and Carmen Reinhart foretell in their book on financial crises.
- On austerity and stimulus, he says monetary tightening is a more likely trigger for depression than fiscal policy. The larger risk on fiscal he says is in a sovereign debt crisis. My view is that a sovereign debt crisis is more an ex-post confirmation of the socialization of losses due to excess private sector debt rather than an ex-ante demonstration of unwarranted fiscal profligacy. Spain and Ireland are the primary examples here. But the same is true in the US and the UK.
- On China, he echoes Edward Chancellor saying it’s "the classic this-time-its-different-story where people come to believe it can never have a normal recession." The telltale signs of a burst bubble given the data paucity in China come via property prices and leverage. And in Rogoff’s view, China has this. When the bubble bursts is another question. But put him in the same column with Chanos and Hendry.
- On protectionism, he says that China cannot keep growing its exports with the rest of the world as they have. He doesn’t believe there will be a trade war but he does see the political impetus coming from US weakness. On the other hand, the recent Chinese currency ‘flexibility’ announcement was a master stroke in his view.
- On the European bank stress tests, he says there are a lot of insolvent European banks. The question is whether we will see them. That’s my takeaway as well.
The video is embedded below.
Source: Rogoff Says China Property Starting to ‘Collapse’ – Bloomberg Businessweek