The Debt Supercycle Comes to China

If the country falls into a recession, it would constitute the next turn of the debt supercycle that began in the US in 2008 and moved to Europe in 2010.

As highly respected Wall Street Journal economics commentator Greg Ip recently put it, “No one talks about secular stagnation now,” referring to a theory that a chronic deficiency in global demand and economically important innovation will hold down growth and real interest rates long into the future.

Funnily enough, I said much the same at a conference seven years ago. 

My presentation, was based on my 2015 paper “Debt Supercycle, Not Secular Stagnation,”  

I then conjectured that “in nine years, nobody will be talking about secular stagnation” – a perhaps hyperbolic remark to underscore the point.

There are strong arguments for secular stagnation on the demand side, owing to demographic decline. In a brilliant 2013 speech, Harvard economist Lawrence H. Summers argued that only a continuing shortfall in global demand could explain the era’s ultra-low interest rates, triggering an avalanche of research on fundamentals that could explain the demand deficiency. 

Kenneth Rogoff Project Syndicate 17 August 2023

https://www.project-syndicate.org/commentary/country-garden-shows-debt-supercycle-comes-to-china-by-kenneth-rogoff-2023-08

 

The Federal Reserve will have to raise interest rates to as much as 5%

to ease the hottest inflation in four decades just as the world faces a “perfect storm” of potential recessions in the U.S., European Union and China,  Kenneth Rogoff said.

Bloomberg 23 maj 2022

Englund: Den mest brutala åtstramningscykeln i USA sedan 1989 (englundmacro.blogspot.com)

Kenneth Rogoff, Professor of Economics and Public Policy at Harvard University and recipient of the 2011 Deutsche Bank Prize in Financial Economics, was the chief economist of the International Monetary Fund from 2001 to 2003. He is co-author of This Time is Different: Eight Centuries of Financial Folly