Tuesday, August 25, 2015

A Warning on China Seems Prescient

Kenneth Rogoff, a crisis expert. Credit Gleb Shchelkunov/Kommersant Photo, via Getty Images
Andrew Ross Sorkin, NYT
AUG. 24, 2015

Kenneth Rogoff has long warned of a potential financial crisis in China.

Mr. Rogoff, a professor of economics at Harvard University, accurately predicted the eurozone debt crisis and for years has been telling anyone who would listen that China posed the next big threat to the global economy. He is starting to look right, again.

“In economics, things take longer to happen than you think they will, and then they happen faster than you thought they could,” Mr. Rogoff said on Monday from Cambridge, Mass., repeating a favorite line from Rudi Dornbusch, the German economist. (Mr. Rogoff sat in on Mr. Dornbusch’s class at M.I.T. in 1977.)

Mr. Rogoff, who is a chess grandmaster, has made a career of studying financial crises. After the 2008 financial crisis, Mr. Rogoff co-wrote “This Time Is Different,” a seminal book that examined eight centuries of financial crises.

Every financial crisis, he and his co-author, Carmen M. Reinhart, concluded, stems from the same simple problem: too much debt.

(More here.)

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