Latest news with #Rogoff
Mint
24-05-2025
- Business
- Mint
Ken Rogoff on How Crypto Is Infiltrating the Dollar's Hegemony
(Bloomberg) -- From the International Monetary Fund to the Federal Reserve, Kenneth Rogoff has spent years inside the institutions that helped shape the dollar-led global economic order. Now, he warns that the dollar's dominance can no longer be taken for granted. In his new book, Our Dollar, Your Problem, the Harvard economist argues that the rise of China, geopolitical tensions and the growing influence of cryptocurrencies are chipping away at the greenback's global standing. In an interview with Bloomberg News, Rogoff spoke about why digital currencies, once dismissed as a fad, are here to stay. The conversation has been edited for brevity and clarity. Q: Why did you include a chapter on cryptocurrencies? A: We're thinking about the future, not just the past. So the book is a sweeping history of the rise of the dollar post-World War II, including how it managed to reach such a high level and how its competitors fell by the wayside. But it's not simply that the dollar became first, but became more dominant than any other currency has ever been. And I see it as in decline — it's fraying at the edges where, of course, the renminbi is breaking free of the dollar, the euro is going to have a larger footprint — that's been going on for a decade. But there's also crypto, because one of the dollar's main markets is the world underground economy. And there, the government does not control things. One of the first questions many people ask is can crypto replace dollars? Crypto can't replace the dollar. But that's in the legal economy where the government has a lot of leverage. But in the underground economy, by definition, it has much less leverage. Q: What is the underground economy? A: It depends on the country. The lion's share is tax evasion. Tax evasion is massive all over the world. The average in the advanced economies is between 15-20%. The United States is one of the lowest — lower than 15%. But in most advanced economies, particularly in Europe, it's much higher. And in developing economies, it's a third of GDP. There's sort of a gray area between what's illegal and what's tax evasion, sometimes they overlap. But a lot of it is what some people might call the gray market, the shadow economy. You don't pay taxes on your nanny, people sometimes pay their painter in cash, their trainer in cash. There are people who pay for apartments in cash. Of course, there's also arms dealing, human trafficking, drugs, etc. But illegal activity's very important, but it's quantitatively much smaller than tax evasion. Q: You argue in your book that Bitcoin has already cut into the dollar's dominance. A: Yes, although crypto has not made significant inroads into the legal economy, it is increasingly used in the global underground economy – consisting of criminal activity but mainly tax and regulatory evasion – where cash, especially US dollars, had been king. The notion that there is no 'fundamental value proposition' in transactions use is just wrong. There are also many countries using crypto to evade US financial sanctions. Q: What are the implications of this? A: The underground global economy is perhaps 20% of global GDP — per my own research and per a World Bank literature survey. This is a big market where the dollar has been particularly dominant. Q: How does crypto cutting into the dollar's dominance raise interest rates for all of us? A: A lower demand for dollars in the global underground economy raises US interest rates, though it is only one of many factors today pushing up rates. The United States' 'exorbitant privilege' — thanks to being by far the most important reserve currency – affects all our interest rates, not just the Treasury bill rate, including mortgages, car loans, student loans, etc. Q: And the second implication is national security? A: In general, a loss of market share of the dollar makes it more difficult for US authorities to monitor financial flows for information that helps preserve national security. Dollar dominance also allows us to impose sanctions. To the extent there is simply a substitution of crypto for paper dollars that were already nearly impossible to trace, there is no new issue. To the extent crypto allows new ways to cloak transactions that had previously gone through normal financial channels, the national security implications of the information loss are much more significant. This challenge is all the more difficult for US regulators to reign in, given that large parts of the rest of the world resent what they see as excessive US control over the financial system, one of the main reasons that we are likely to see continuing diversification away from dollar markets toward other transactions vehicles, something Our Dollar, Your Problem discusses at length. Q: And will crypto's dominance continue to grow? A: Absolutely. Crypto's going to continue taking over the global underground economy on transactions. There are people who think that crypto is going to go to the moon, but there plenty of people — Paul Krugman, Nouriel Roubini, Jamie Dimon, Warren Buffett — who said pretty recently that they think crypto is just a scam. In the crypto chapter, I explain why that's completely wrong. Because if the underground economy is 20% of global GDP that makes it — depending on the value of the dollar — a $20-to-$25 trillion economy. And if you're providing the means of exchange, that's a value proposition. Crypto has value. It's used for transactions. There's a big piece of the economy, which even if crypto's heavily regulated, the government is going to have difficulty controlling. So it's not worthless. There's a lot at stake there. More stories like this are available on
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Business Standard
10-05-2025
- Politics
- Business Standard
Best of BS Opinion: Quiet powers that are shaping a tumultuous world
Have you ever noticed that a candle with a steady flame doesn't scream for attention? It doesn't flare or flicker. It simply holds — quiet, consistent, defiant. In a world hooked on chaos and speed, that kind of constancy is easy to overlook. But this week's stories, wildly different as they are, are all drawn to that image: forces that burn without blinking, whether they illuminate, unsettle or quietly persist. Across economics, politics, technology, and culture, the flame holds its shape—even when winds rise. Today's stories are a reminder of that little flame. Let's dive in Kenneth Rogoff analyses one such flame in the form of a misunderstood economic strategy — the so-called 'Mar-a-Lago Accord' aimed at weakening the US dollar. While presented as a fix for deindustrialisation and trade deficits, the plan, like a draft caught in an open window, misunderstands the physics of the room. It fixates on the currency's strength but forgets to ask why that strength exists. Rogoff gently but firmly lights the path toward real solutions — fiscal discipline and domestic investment, not artificial interventions. In a flickering corner of the literary world, Sandeep Goyal explores the AI-assisted resurrection of Agatha Christie. BBC Maestro's controversial writing course has ignited both admiration and outrage. Is it a tribute, or is it torching ethical lines we've barely drawn? Whether you see it as flame or flammable, it's part of a broader fire catching hold in creative industries — where nostalgia, AI, and commerce spark together, sometimes beautifully, sometimes destructively. Meanwhile, in India's political heart, Aditi Phadnis writes on a rare show of unity amid conflict. 'Operation Sindoor' has seen opposition and government walk side-by-side, drawing on a deep democratic tradition of solidarity during war. Like the candle, this consensus glows steadily — difficult to notice in daylight, deeply reassuring in the dark. But in Shekhar Gupta's piece on Pakistan's General Munir, we meet a man not lighting candles, but stamping them out. His aggressive stance on Kashmir, timed with India's peaceful gestures like the Vande Bharat launch, suggests a deliberate attempt to quench the symbolism of normalcy. When one flame rises, another tries to snuff it. Vanita Kohli-Khandekar closes the loop with a cultural reflection: as Hollywood faces tariffs and internal tremors, its soft power dims. Trump's proposed restrictions on international shoots could hollow out the emotional fire America exports to the world. If that flame flickers, no other nation — despite talent — can quite replace its glow. Stay tuned, and remember, even in the darkest rooms, it's not the storm that matters the most, it's the flame that holds!
Axios
09-05-2025
- Business
- Axios
The dollar's reserve status at risk
The United States is ripping up longstanding trade arrangements, developing more hostile relationships with allies, and undermining independent institutions, all while rapidly running up more debt. The big picture: That's a recipe for the role of the U.S. dollar as global reserve currency — unquestioned since the end of World War II and at a high-water mark just a decade ago — to fade. So argues Ken Rogoff, the Harvard economist and former chief economist at the International Monetary Fund, in a conversation with Axios and in his new book "Our Dollar, Your Problem." President Trump's policies have accelerated that process, Rogoff argues, but it was already set in motion. State of play: When a company in Indonesia does business with one in South Korea, it probably transacts in dollars. When a country in the Middle East runs up huge surpluses from selling oil, it probably parks the money in dollar-denominated investments. And when a bank in Europe does business with a country that is on the outs with the U.S. government, it can face massive fines and risk losing access to the global dollar payments system. Alternatives to the dollar — the euro, the Chinese renminbi — have to this point not been true rivals, as neither offers the kind of deep and open debt markets and institutional frameworks that make them particularly attractive outside their home countries. Zoom out: There have always been aspects of this system that other countries don't like very much — hence the title of Rogoff's book. The U.S. sets fiscal and monetary policies based on its own interest, so countries tethered to the dollar are along for the ride, losing some control over their domestic economies. And the U.S. has used economic sanctions in recent years for an increasingly wide array of goals — in the view of rivals and even allies, acting as a geopolitical bully. That was already setting the stage for other countries to try to bolster their capacity to use other currencies for global commerce. The sense that the U.S. is an unreliable partner is turbocharging that process. What they're saying: "What's happening under Trump is an acceleration of where we were going," Rogoff tells Axios. "He's a catalyst and an accelerant. But I do think if [former Vice President Kamala] Harris had won, the risk would have been pretty big over a longer arc of time, say, five to seven years, than Trump has managed." "This isn't something that just turns overnight, but the rest of the world was already seeking more freedom from the dollar, and this lit a fire under it." "In order for the euro to become more important outside Europe, they need to expand their financial system, the banking networks, in a way that accommodates that, and ditto the Chinese. The Chinese are working very hard at that." The U.S. response to Russia's 2022 invasion of Ukraine lit a fire under the Chinese, Rogoff adds. "They saw what we did with sanctions and that we froze central bank assets." "They have open doors, not just from Russia and North Korea, but large parts of Africa, Asia and Latin America. They don't trust the Chinese, but they don't trust the Americans anymore, either." Several officials in Trump's orbit argue that the U.S.'s reserve currency status — the "exorbitant privilege," as it has been called — comes with a heavy burden and that it is high time for the rest of the world to pay for that. Top White House economist Steve Miran said recently that "our financial dominance comes at a cost." "While it is true that demand for dollars has kept our borrowing rates low, it has also kept currency markets distorted," Miran said. "This process has placed undue burdens on our firms and workers, making their products and labor uncompetitive on the global stage." Yes, but: Rogoff argues that the costs of dollar dominance are more subtle than that, and that the benefits the United States receives are considerable. "If you have a mortgage, you have something to lose, because the exorbitant privilege brings down all interest rates in the United States. Auto loans, student loans, it's a very direct effect," he says. "More subtle but important is when the next crisis hits, if we've lost our exorbitant privilege, we will not be able to borrow as much to fight it. The rest of the world looks in awe at how much the United States is able to borrow" in episodes like the COVID-19 pandemic and the 2008 financial crisis. "There's a national security element. A huge percentage of the global financial network essentially goes through U.S. regulators. The fact that we get all this information makes the U.S. able to ward off terrorist threats, allocate our intelligence services, and use sanctions in place of military interventions."
Business Insider
07-05-2025
- Business
- Business Insider
Stock-market investors aren't pricing in a likely recession this summer, former top IMF economist Ken Rogoff says
President Donald Trump's tariff policies will likely result in a recession, says former top IMF economist Ken Rogoff. Rogoff told BI on Tuesday that the most probable path for the US economy in the months ahead is a mild downturn, but how the economy trends ultimately depends on how Trump approaches his trade war. If Trump's full tariff plans are implemented, a recession is a certainty, he said. "If he sticks with his tariffs, with his chaos policy, 100% we will get a recession," Rogoff, now a professor of economics at Harvard University, said. "The question is how far he retreats." "I think a recession is probably still the baseline case, a mild recession," he continued, adding, "I think we'll know by the end of the summer what's going on." Rogoff said investors are not pricing in the downside risks he sees and that stocks are overvalued. The prevailing assumption in the market is that most of Trump's tariffs will be lifted in a year, he said. Trump's 90-day pause on his so-called "reciprocal tariffs" above and beyond the 10% import taxes on most goods entering the US expires in July. Stocks plummeted on their initial announcement in early April but surged when Trump paused them days later. Investors seem to be discounting Trump's more extreme tariff positions, as he's provided some exemptions for the tech and auto industries and has appeared willing to take a softer stance on China going forward. Rogoff said investors think Trump will lower tariffs, adding: "If they didn't, the stock market would be a lot lower." The S&P 500 closed nearly 9% below its February 19 all-time high on Tuesday. "If the forecast of even a 30% chance of recession is true, it feels like stocks are still overvalued," he continued. "Surely they will come down a lot if we have a recession. So the market seems pretty sanguine that we won't." Amid elevated risks, Rogoff said it may be a good time for investors to diversify some of their money abroad. The US exceptionalism trade — the idea that US assets will continue to outperform their global counterparts — is weakening thanks to the trade war, and foreign stocks are arguably more insulated from a recession since US price-to-earnings ratios are still much higher relative to the rest of the world. "There's an unusually strong case for international diversification at the moment," he said. "There may be downside to European stocks too, but less than the United States." Rogoff is the author of "Our Dollar, Your Problem," a new book that argues the dollar's global footprint is on the decline and has been since 2015.
Yahoo
06-05-2025
- Business
- Yahoo
The economist who got Trump right
No. It's shocking. I didn't expect he would do something as extreme as what he did, and the part of it that I didn't expect was this 'Let's make a deal' part of it. That's the idiotic part. Ken Rogoff: People didn't think it was real, right? I have to assume they thought he would not do it. I think what he did shocked his advisors. No one was expecting it. Ben Smith: In Davos, I wasn't sure if you were looking ahead to chaos caused by a Trump administration, or if you were just assuming reversion to the mean. Rogoff, who was from 2001 to 2003 chief economist at the International Monetary Fund, arrived at the Harvard Club with a hardcover copy of the new book tucked into his gray World Economic Forum-branded backpack. We talked about the coming storm, the lost art of political economy, and how — in his view — Trump has killed efforts at moderate reform at Harvard. Another thing about coffeehouse players, he said: 'If you're not looking carefully, they try to take their moves back.' 'They're very successful against weak opposition by being very aggressive. But they lose to strong opposition because being too aggressive opens them up. A strong player will counter-punch and win.' Trump is a 'coffeehouse chess player,' he said. 'That's somebody you might meet in Washington Square Park who's pretty good, but not a lot of book learning. He's been trying to understand how Trump has, in his view, so rapidly accelerated the perhaps-inevitable decline of American financial power. He has settled on a metaphor based on his experience as a chess grandmaster who, as recently as 2012, fought Magnus Carlsen to a tie in a blitz game. 'Everyone I was talking to, particularly about the dollar in decline, said 'That's ridiculous,'' Rogoff recalled over a decaf cappuccino at the Harvard Club last week. Rogoff told everyone he talked to, from journalists to hedge funders, that he anticipated a recession within two years and a burst of inflation, set against a backdrop of declining dollar hegemony. The financial elite assembled in the Swiss Alps saw Donald Trump about to unleash 'animal spirits' with a party cocktail of tax cuts, deregulation, and anything-goes dealmaking. Rogoff, who had been warning for years about rising US debt, saw a fragile, unlikely system of American economic dominance under rising political pressure and almost sure to break. In Davos this January, in the pre-Liberation Day good times for global capitalism, Ken Rogoff was a rare voice of dissent. The Harvard economist just finished writing a lively but ultimately gloomy book called Our Dollar, Your Problem about the trajectory of global finance, out this week. Story Continues If you asked academics how bad it would be just to put in a flat 10% tariff, it's not that big a deal. If you've used the money intelligently, you can cut taxes in other areas. People would adjust. What was disconcerting about this was he wanted to make deals and go to war, and then things are way beyond tariffs. I just came back from the UK, and — I'm not making this up — [Trump] says, 'You have to improve your free speech rules and you can't have a trade deal without it.' The British are saying, 'Free speech was our gift to you.' So it's the chaos and the incompetence. I've never liked Trump, but I thought he was a pragmatist in economics. He didn't get everything right in his first term, but he had some good instincts. When something doesn't work, he changes it, which by the way is the biggest problem with progressives; when it doesn't work, they don't change. He's good about that. But [Trump] really believes it. The comparison to Liz Truss is hard not to make, where the British joked there was a 'moron premium' in British bonds. We certainly had an incompetence premium. Does this accelerate your worries about recession and inflation — or is it not too late for him to dial it back? It's too late. Let's forget about the recession; when you're talking about the decline of the dollar, you can't unring that bell. This isn't in the book, [but] a G7 central banker came to my office at Harvard seven or eight years ago. He tells me how much he hates it that the US sees everything, because of the dollar dominance. He had just bought something for his wife. It was an intra-European transaction, but done with a credit card that clears through the US and it just infuriated him that Trump could literally see it if he wanted to. This is a person who really, really knew the system. This isn't a casual comment that he's making. He hated it and he explained the Europeans were trying to get away from it. The rest of the world is looking to have other options. And then there are these concerns that I talk about in the book. There's an unsustainable deficit, which is not an arithmetic claim, it's a political economy claim. We're not prepared to do whatever it takes…. No country, even Argentina, needs to default — or needs to have inflation, in our case. And then Federal Reserve independence worries me a lot. You wrote a key early paper about the independence of the Fed. Do you think Trump will try to fire Powell? And what happens if he does? Is there a safe room in the basement of the Fed they stick him in? Both sides want to take away Fed independence to a significant extent. What Trump says [in public], every president says in private. And you could do it in the blink of an eye. There's no constitutional protection to the Fed — none, zero. It could be eliminated if you had congressional support, and Congress could make the Treasury secretary a Fed governor. The way I would describe the Fed is it bends with the wind. So under Biden they produced all this research on inequality and the environment. And they'll bend with the wind with Trump. So it's already in some sense not independent. Do you think Trump's pressure for the Fed to cut rates will work? Like many things Trump does, he shoots himself in the foot. So they should be cutting faster, and they won't because of Trump. You remarked to Tyler Cowen the other day that 'people have forgotten about political economy.' What do you mean? So much of what young macroeconomists do, particularly when they study monetary policy, is they look at it like setting a thermostat. There's no person behind it. It's a machine you're setting, with no ulterior motives or incentives. If you tell that to an ordinary person, they're never going to believe you, but a lot of Wall Street has come to believe this. The inflation expected by the professionals, and particularly the markets, moved up a little bit after Biden. But you look at our debt, you look at some of the challenges that we might have to face with paying for our military, paying for progressive ideas, you know, and on and on, and there are a lot of pressures on us. Why would we think that we're never going to have another [round of] inflation? It's their heads in the sand. We'll have a pandemic, or a cyber war, or some kind of problem I can't even imagine, and there's going to be a balance between taking risks with inflation and taking risks with growth, and this very large debt is going to be one of the reasons we don't want to take a risk on growth. What do you make of Trump's assault on Harvard? The situation in universities is disastrous… If you go up to about 1910, [Harvard's assigned] reading lists are fine. After that, it reads like the progressive handbook. is no longer taught, is no longer taught because for whatever reason they think it's too conservative… If you go to the American Economic Association meetings, the word 'inflation' did not appear prominently until this year, [according to a recent article]. The word 'debt' still doesn't appear in leading words, but 'gender,' 'environment,' and 'inequality' are leading words. So there's this problem of lack of diversity of thought. I certainly think DEI was a good idea taken too far. We have problems and we need to fix them, but Trump coming along with this incredibly crude overkill art-of-the-deal, saying he wants to run Harvard — well, it's actually counterproductive. It's going to have a chilling effect.
