Latest news with #YourProblem
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
Bloomberg
15-05-2025
- Business
- Bloomberg
Bloomberg Surveillance: Tariffs and the Dollar
Watch Tom and Paul LIVE every day on YouTube: Bloomberg Surveillance hosted by Tom Keene & Paul Sweeney May 14th, 2025 Featuring: 1) Ken Rogoff, professor at Harvard University and former IMF Chief economist, joins for a two block, extended discussion on his new book, "Our Dollar, Your Problem," the "exorbitant privilege" of the dollar as the global reserve currency, and how the Trump administration is expediting the unseating of the dollar's position on the global stage. Ccurrency-centric headlines out of South Korea suggest that the dollar's consolidation this month may be imperiled if signs grow that the US administration is now shifting focus from trade to exchange rates. At the heart of the Dollar Index's immediate decline is a lingering concern that the Trump administration may pursue policies that involve countries selling the dollar to cure perceived economic imbalances stemming from a strong currency. 2) Wei Li, Chief Global Investment Strategist at BlackRock, joins for an extended discussion on tariffs causing further contractions, a US stock rally, and the fear of sticky US inflation. The stock recovery in stocks got an extra boost this week after the US and China cut trade tariffs, US inflation slowed, and earnings came in better than expected. Wall Street strategists are skeptical about how much further stocks can run. 3) Lindsay Rosner, Head: Multi-Sector Investing Goldman Sachs Asset Management, talks about signs of bottoms up in the credit world, upside inflation risks, and consumer strength's effects on economic growth. The yield on 10-year Treasuries advanced one basis point yesterday and the Bloomberg Dollar Spot Index fell as the Federal Reserve is expected to stay put in evaluating potential implications of tariffs. 4) David Bailin, CEO at CIO Capital and former Chief Investment Strategist at Citi, brings us into the market open and talks about his belief the US could enter a "Compression Recession" that could blindside everyone. Tensions around President Trump's trade war cooled and inflation data showed limited impacts, but there could be underlying risks to the economy. 5) Lisa Mateo joins with the latest headlines in newspapers across the US, including an NYT story on rival nations recruiting talent cast aside by American universities and a WSJ story on workers feeling overpaid.
Yahoo
07-05-2025
- Business
- Yahoo
It's 'hard to see' how US avoids recession, economist says
00:00 Speaker A It's time now for today's strategy session. Over the past few months, President Trump's trade policies along with some other headwinds have weakened the US dollar against most major currencies, triggering doubt around the dollar's long-standing dominance. This combined with record debt levels could create a genuine financial crisis, according to our next guest. Joining us now to discuss Kenneth Rogoff, a former chief economist of the International Monetary Fund and the author of "Our Dollar, Your Problem". Ken, great to have you. Thank you for coming in studio. 00:25 Kenneth Rogoff Glad thank you for having me. 00:27 Speaker A We appreciate it. So, talk to me about the declines we've seen in the dollar. Was the dominance of the dollar already at risk prior to this administration? And what is that signaling to you? 00:37 Kenneth Rogoff So, the dominance of the dollar, and we're talking about not just the level of the dollar, which I will say is super high, still, even after coming down, but how much it's used in trade, finance, what have you, like English. Uh, it actually was coming down for about a decade, at least, by many measures that I look at. And I think there are a lot of reasons for decline. One is there's an appetite on the outside, particularly from China and parts of Asia, but Africa, parts of Asia, uh, uh, Russia, obviously, but Europe too, to have other options, not just for what things are denominated in, but for the financial system. You want to do a transaction that President Trump or the Americans can't see? There's a huge appetite. And, I tell you, it's the, it's not just the Chinese, they don't like all this American control. So the most efficient thing is to have one currency, but not politically, not if America gives America too much power. But I'd also say, on the inside, you know, the internal problems with, particularly our budget deficit, which I know people have been talking about for decades, but interest rates have normalized in my opinion. Long-term real interest rates are probably higher for much, much, much longer. I've been talking about that, and writing about it for a long time in my research. Uh, you know, we had a big drop after the financial crisis happened many times. If you look at centuries, it's high, it's low, until it isn't. I mean, after the Great Depression, it was down around zero for a while also. So that, when you're the world's biggest debtor, that's a problem. And then if we lose some of our exorbitant privilege, which gives us a lower rate than we would pay otherwise, that's so much the worse. I think that was fading, not going away, but clearly got an acceleration under President Trump. 03:36 Speaker B I wonder how you evaluate all of the flows into gold by central banks and how that creates more of a long-term headwind for the dollar right now. 03:51 Kenneth Rogoff Well, absolutely. For central bank reserves, gold has become a big option. The Russians have been doing that for ages. They've been absorbing their whole gold supply. The Chinese are doing it. Everybody's doing it. So, that's, you know, that's not the main event. 04:16 Speaker B Sure. 04:17 Kenneth Rogoff But, in terms of, it's one of the signs of, they're just trying to look to diversify. Now over the long run, gold's not ideal. They'd like to have something more liquid, easily traded. Uh, but I think that'll come in time. 04:32 Speaker A Do you mind breaking down for me, just in layman's terms, why we like to have the world's reserve currency? Like why does that benefit us? And why might we not want to lose that status and that privilege, as you say? 04:43 Kenneth Rogoff So it benefits us in manifold ways. And not to pitch my book, but you kind of have to read it to read about it. But, you know, the obvious ones that I mentioned, you pay an interest rate that's lower than you would otherwise. It's a big market, it's so liquid, you feel safe. That was true when the UK was the dominant currency and now we are. But there are lots of other things. So one thing is we are able to borrow a lot in a crisis. And there will be another crisis. I don't just mean one that Trump causes. I mean a pandemic, uh, cyber war, something. We, progressives complain we don't borrow enough, but we borrow a lot more than anybody else does. And why don't the other countries borrow as much? Because they see their interest rate shoot up. Ours go up, but more gently. Although that has gotten worse as interest rates have gone up. There are more subtle national security things that are a big deal. A lot of modern spying is cyber. Somebody sitting with a laptop in a dark room and, you know, the uh, CIA building, not the James Bond stuff. And a lot of that is uh, what we got from the financial system. Everything flows through the United States because of our dominance, the dollar, our military dominance. So, there, there are many, and there are many things beyond that. So, why might we not like it? Of course, the Trump administration has Steve Moore, who's very smart guy who's the chair, has said no, it's a burden, it's terrible. It makes the dollar high, it de-industrializes us. And, you know, a short answer to and and makes us run deficits. And a short answer to that is we've been the dominant currency for a while. We weren't running deficits in the '60s and '70s and we were still the dominant currency. The UK was the dominant currency when, you know, the 19th century, when the sun never set on the British Empire, and they ran surpluses. Uh, there are, you know, reasons for de-industrialization which have to do with trade. There are many things that affect our, I should say there are many things that affect our exchange rate. But the big point is that our trade deficit is basically how much the country saves versus how much we invest. Invest meaning real investment, plants and equipment, etc. Well, a lot of things affect that besides the exchange rate. One of them, what do you know, is the government budget deficit, which right now is higher than our trade deficit. So if I really cared about stability and this trade deficit, how about closing up the government budget deficit? 08:28 Speaker B At a House meeting committee hearing Tuesday, we know Treasury Secretary, Steven Mnuchin was asked about the X-date here, the date where the U.S. government will reach its borrowing limit. I want to play a clip for you of what he said and get your reaction on the other side. 08:57 Steven Mnuchin As an outfielder running for a fly ball, uh we are on the warning track. And, of course, the United States government will never default. That we will raise the debt ceiling and Treasury will not use the, any gimmicks. Uh, we will make sure that the debt ceiling is raised. 09:41 Speaker B And so what, what is an appropriate level for the debt ceiling to be raised to? And, and how sustainable is the just continuous raising of the ceiling in order to accomplish what spending targets are also being put forward as well? 10:01 Kenneth Rogoff I mean, I think it'd be fine if we got rid of the debt ceiling. That's not really our problem. The Treasury Secretary is right, we're always gonna raise it. The debt ceiling is sort of, I have a credit card bill, but I don't know if I want to pay it even though I have a lot of money. Uh, no the sustainability of the debt has more to do with, most of all, that interest rates have gone up. So, back for a long time, it seemed like there was no, you know, bill to pay, you just kept borrowing and re-borrowing. You didn't even pay the interest. But now, the interest bill, if you've noticed, has doubled, on its way to tripling. It's gonna be more than, it is more than the defense budget, on its way to a trillion dollars. And that's when you, it gets less easy to borrow another 30% of GDP if there's a pandemic, uh, to pay for something. Uh, there there are, there's a cost. You would rather have lower debt. I mean, there's nothing easy to do about it. But, uh, no, the debt ceiling's sort of theater and power grabbing. And maybe there'll be a slip sometime and we'll screw up and actually default. Great for sales of my book, but I don't think it'll ever happen. 11:45 Speaker A Okay. Well, that is at least some good news. I do want to bring us back to some potential bad news. What is your call on a potential recession? 11:56 Kenneth Rogoff So that is, I think it's more than 50/50 to have at least a gentle slowdown. But we're trying to read into the mind of Trump. Because of course, if he really did an about-face on the tariff stuff. And I don't mean the 10%, which is maybe not the greatest idea, but just, you know, the "let's make a deal", "I'm uh Hollywood needs to be protected. Let's have a tariff on that." I was just in the UK, and you probably, maybe reported on this, but he wants them to have free speech. And they're going like, "We gave you free speech. We, we're the home of free speech." And a lot of the things are just, you know, out there. That they're asking for sort of some MAGA wish list. And it's, it's very disconcerting. Now I have to say, a lot of people you probably talk to, you know, big finance people and hedge fund people, and clearly the market thinks, "Uh, he's a pragmatist at heart. He knows he screwed up." I don't know if he knows he screwed up. "He's gonna back off." And they just think it's gonna go away. That, I think if you did a poll, you can try it, of where are we gonna be in a year? They'd all say, "10% tariffs, maybe a little fluff with China, it'll all be over." I'm skeptical of that. And that's why I think the odds of recession are higher. I mean, Trump's still gonna be Trump, uh, for better or for worse. So, I don't see an exit from the chaos. If there's no exit from the chaos, uh, it's hard to see how we don't have at least a mild recession. 13:53 Speaker B Is this a case where we need to see some of these smaller trade deals start to come through first or is there need, there's, does there need to be resolution on one of the larger trade partners out of the gates here to really set the tone? Because some could argue that he already kind of showed his hand. Didn't want the stock market to go into bear market territory. That would have looked bad. And then additionally, you've got all the CEOs showing up at 1600 Pennsylvania Avenue's doorstep, saying, "Hey, we're not going to have stuff on shelves in the summer if you don't step back off of this." 14:30 Kenneth Rogoff No, you are so right. That's what not just the markets thinking, that's what all our trade partners are thinking. They're, why aren't you seeing reports of, you know, sudden deals? Because they don't want, they can't for their own public. By the way, if Xi gave in to Trump and lost face, he'd be done. I mean, he cannot any more than Putin, you know, can surrender. Uh, he can't. So you know, everybody, my conservative friends, and uh, I regard myself as a centrist, but my conservative friends will say, "Ah, this is just the, you know, Art of the Deal, don't pay attention." And I say, "Okay, but when he was a real estate mogul, he was bidding on a hundred things. So he got three of them. Great. He got three good deals, he's making a lot of money." We can't walk away from the other 97 countries, you know, in this case. 15:25 Speaker B Not a great percentage. 15:25 Kenneth Rogoff Yeah, it's not a good percentage when you're President. It was a, it was a great, you know, approach when you're a real estate mogul. So we'll see. If I want to say something that could turn in his favor and make him look amazing in 10 or 15 years, it would be that even though it's all chaotic, and he's not always lasering in, China is our rival. They are down right now. He's hitting them while they're down. And if he didn't, there's gonna be something over Taiwan, there's gonna be a problem somewhere. And so maybe he'll say, "Oh, just a stroke of genius that he took 'em on when they were vulnerable. Xi fell and they got rid of Xi, turned into more." I'm really playing this out. "Had a more democratic government, it all worked." And Trump, although he was so uh, you know, brutal in his approach to trade, he got it done. Anyway, I'm an American, I wish well for our President. I hope that's what we're writing in 10 years. 16:51 Speaker B Dr. Kenneth Rogoff, we really appreciate you coming on and sharing your insights with us today. Thank you. 17:13 Kenneth Rogoff Thank you.
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.
CNBC
06-05-2025
- Business
- CNBC
The dollar's dominance at risk? Harvard's Ken Rogoff on the future of the greenback
Kenneth Rogoff, Harvard University economics professor and 'Our Dollar, Your Problem' author, joins 'Squawk Box' to discuss the value of the U.S. dollar, the dollar's global dominance, whether the dominance is at risk, the dollar vs. crypto, his thoughts on Fed Chair Powell, and more.
