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00:00Can to one of the great algebraic books the giant Wendy Carlin of the University College of London where their effort on the three equation I s l am system. We have just had a natural disaster. We have had a massive Covid fiscal impulse. What does your world say of how we extricate ourselves from a massive increase in the fiscal. A massive increase in debt. Well I mean I think a lot of policy of the past couple decades and frankly a lot of the academic thinking and literature was predicated on we'd never have a war we'd never have a big supply shock. Interest rates would naturally go up. And guess what. Oh and there'll never be inflation. And it's happening. And we know we have to make adjustments that people haven't seen for a long time. And I think it's going to be much harder than it was in the 1980s. The political environment's changed. The economy has changed. As you said there's much more doubt the stock market's really high. People are really worried about inequality. It's going to be a heavy lift to try to treat this like a classic Keynesian demand shock because of all the news. So can I have to turn to. I've sold Rogoff in your excellence in IMF. Following on from Rudy Dawn Bush. David Focus Land speaks of a dollar stronger. He nailed that along with others. And here we are. How do you actually weaken the dollar. Well you know I mean the dominance of the dollar in trade and transactions would be there whether the euro their their 150 dollars per euro or for the opposite. I mean that that's that's a given. But you know right now there's this concern that no matter how troubled the U.S. is there are other countries that are in worse shape. So it's actually you know going can take a change. I think a lot of countries are having to react because inflation goes up from the dollar strengthens. But paradoxically we don't get that much benefit in the United States from the stronger dollar because so much trade is priced in dollars but the rest of the world has to react. Well let's talk about different parts of the world and can that may be hit by a stronger dollar more substantially. Are we on the verge of a currency crisis in any emerging markets. Well currencies certainly fall and I don't know you know exactly I'd say currency prices were at risk of. Certainly debt crises in places like Turkey and some of the lower income middle income emerging markets. My co-author and colleague Carmen Reinhart at the World Bank is warning that there may be banking crises and all of that of course may lead to currency crises. In principle the movement of the currencies cushioning and preventing things from falling apart. But it's very stressful. I mean having your currency fall and having inflation go up and having to raise interest rates. So that position you're quite right. Kayleigh the position of emerging markets is really tough. And do rate hikes from central banks fix that or do you need direct intervention. Well I think they're going to do a mix of both rate hikes help. But a lot of these countries don't really have the kind of frictionless capital markets that we have. Certainly you know in the United States. And so they're able to intervene. But you can only do that for so long. The Asian countries have a fair amount of reserves. Other countries not some. But you can't do that indefinitely. OK. So I would like to move the conversation from fiat currencies to the realm of digital and cryptocurrency tech. Tom was pointing out my required reading The Curse of Cash. You look at the future of currencies and digital currencies have a role to play. And I'm wondering how you differentiate the idea of CBD you know central bank digital currencies a potential digital dollar versus the broader kind of speculative assets that crypto currencies seem to be at the moment. Not a simple question. I mean I think at the moment if you think about the United States issuing the CBC you have to ask why they're doing it because we have can accomplish a lot of the things the same way in the current system by making tweaks. If you did it to well you had a retail central bank digital currency there'd be massive disintermediation that we're probably not ready to handle. There are small central banks that want to issue a CBC hoping they'll get some of the kind of business that crypto gods. But it's very different something that's going to be information that the central bank sees and crypto currencies where the general idea is to try to make it expensive to track you. I think central banks are way behind the curve and governments in general in regulating crypto currencies they throw out the idea of having CBD seize to distract the conversation. But what's so important here is your. You're very courageous book The Curse of Cash is the why we both you and I are on the same page. We both agree. Where is regulation. Fine. What is the why of the delay. You know I think it's it feels like the 1990s and early 2000s to me when the financial system was inventing all these clever new financial engineering devices and saying you know catch me if you can regulate me if you can. And I hear very much the same things from the young crypto currency pioneers. And there are a lot of ideas there. But they're wrong that they can't be regulated. But they're you know they're lobbying. We saw the Super Bowl right with 20 percent of the ads currency. There states like Colorado and Florida which seem to want to be the next El Salvador there. They're giving a lot away a lot of money to try to control the regulation. They complain about the FCC. So they're pushing back hard. One final question. Is Japanese yield curve control. Is that in the next edition of ISE filled Rogoff. I mean I think it's not you know it's something that works like a zero interest rate environment but it can come back to bite hard. And I think other central banks who've toyed with it back off. And as interest rates rise Japan will have its own problems. Professor did you ever think that we'd have a central bank to own 50 percent of the outstanding bonds as say the JCP market. The limits to that can in your mind other limits to that. Well I mean in a way there are no limits to it in the sense that central bank debt is owned by the government and search as a way of issuing short term government debt. But if interest rates rise and countries have very short term borrowing including through the central bank they've either got to allow inflation to go off or they've got to start unwinding a lot of that. And if global real rates rise and I think they will continue to for a while we're going to see a lot of pain there.

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Harvard's Rogoff on US Dollar and Crypto Regulation

Ken Rogoff, Harvard University economics and public policy professor, discusses the impact of a stronger US dollar on the global economy and says central banks are "way behind the curve" on cryptocurrency regulation. He speaks on "Bloomberg Surveillance." (Source: Bloomberg)

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