BM: There is some question over the future path of inflation. And I think that’s very wrong. She received her Ph.D. from Columbia University. She became the subject of general news coverage when mathematical errors were found in a research paper she co-authored. So we wanted to be close to family. It’s certainly different from prior pandemics in terms of the economy, the policy response, the shutdown. For the G-20 initiative, I indeed hope it is the G-20 and not just the G-19. There are a lot of geographic changes that are being necessitated because, if the economic downturn has been synchronous, the disease itself hasn’t been synchronous. We have the first global recession crisis really since the Great Depression. [1] They have one son. We came to Florida, where weâve had a house for a decade. ", "Rogoff and Reinhart defend their numbers", "Does High Public Debt Consistently Stifle Economic Growth? Private family services will be held at Esterdahl Mortuary, Moline, and she will be laid to rest next to her beloved husband, ⦠So certainly we would strongly endorse doing what governments are doing. Is this time different? They started their book around 2003, years before the economy began to crumble. And if there’s a shakeout that involves concerns about Italy’s growth, then we could have a transition again from the focus on the Covid-19 crisis this time to a debt crisis. But wisdom helps discern a crisis before it begins â before it metastasises through our politics, our economies and our country. So I think the settling point for Chinese growth is going to be well below 6%. CR: Some of the scars are on supply chains. The Covid-19 pandemic has catapulted the world into its deepest recession since the Great Depression, provoking an unprecedented fiscal and monetary response. And you want to talk about a negative productivity shock, too. And I think that would have been cheap money in terms of restoring growth in the euro zone and would have [been] paid back. China needs to be on board with debt relief. BM: I will start with the clichéd question. Patrick R. Sullivan 14. But I’m saying that then your settling point is going to be lower than 6%. And if the U.S. government is not in, if China’s not in, it’s not really enough. I wonder if the Reinharts ever argue about economics. To feed nearly 60 million people, give them food and water and concentrate medical attention? BM: What is the appetite at the IMF for coming to the rescue? Again, we’re going to see huge forces pulling apart the euro zone. I don’t think we’ll return to their precrisis normal. The American Economic Review 106.5 (May 2016): 574â580. Kennedy is executive editor for Bloomberg Economics in London. The Journal of Economic Perspectives 30.1 (January 2016): 3-27. CARMEN REINHART: My husband and I are among the lucky ones because we can work from home. A separate and previous criticism is that the negative correlation between debt and growth need not be causal. [1] After her B.A., Reinhart worked for her master's degree in Philosophy, eventually receiving this degree in 1981 from Columbia University. and Professor of Economics and Director of the Center for International Economics at the University of Maryland. The biggest positive productivity shock we’ve had over the last 40 years has been globalization together with technology. So we wanted to be close to family. [4] She is a Research Associate at the National Bureau of Economic Research, a Research Fellow at the Centre for Economic Policy Research, Founding Contributor of VoxEU,[5] and a member of Council on Foreign Relations. But at the end of this, I think we’re going to have experienced an extremely negative productivity shock with deglobalization. Can you imagine the Chinese state having the capacity to shut down Hubei province? You’ve also had much of its double-digit growth come from incredible fixed investment. Please help by adding references that support its inclusion, or remove the category if none exist. It’s probably much larger than the measured fall. (2010) "Growth in a Time of Debt." Illustrator: Marta Zafra for Bloomberg Markets. Initially, she said, her middle-class family had felt no immediate threat from the 1959 revolution led by And my own view is that neither of those are likely to be true. So I think initially that the PBOC [People’s Bank of China] has been somewhat constrained initially in doing their usual big credit stimulus by uncertainty over their inflation. Vincentâs brother lives in this area. [18], In 2013, Reinhart and Rogoff were in the spotlight after researchers discovered that their 2010 paper "Growth in a Time of Debt" in The American Economic Review Papers and Proceedings had methodological and computational errors. For many emerging markets, we’ve also had a massive, massive oil shock. It’s probably going to be, at best, a U-shaped recovery. Journal of the European Economic Association 14.1 (February 2016): 215â251. Which restaurants are going to come back? If this thing persists, a lot of those European firms will end up having to let their workers go when the crisis passes. And we may be at that same juncture in another couple of years where you’re looking at just staggering austerity in Spain and Italy on top of a period of staggering hardship. The Fed has established a lot of facilities that are now providing support not only to corporates, but to the fallen angels, the riskier corporates that certainly were not envisioned at the outset of the pandemic. So the probability is, for the foreseeable future, we’ll have deflation. [17], Fellow economist Alan Blinder credits both Reinhart and Kenneth Rogoff with describing highly relevant aspects of the 2008 financial institution near-meltdown and resulting serious recession. The policy response is also different. CR: How much of the resilience, if not ebullience, in the market is policy driven? And there was the shift to Zoom, which created more work because you’re trying to prepare differently and do your lectures differently. Carmen M. Reinhart is Professor of Economics and Director of the Center for International Economics at the University of Maryland. Subsequently, she spent several years at the International Monetary⦠Reinhart, Carmen M., and Christoph Trebesch. Instead it has hired Carmen Reinhart of Harvard University, one of the most widely cited economists in the world (and the most cited female economist). But just as the hospitals can’t handle all the Covid-19 patients showing up in the same week, neither can our bankruptcy system and neither can the international financial institutions. When Carmen Reinhart and Kenneth Rogoff published their heavyweight history of financial crises in late 2009, the title was ironic. Our son lives in this area. This page was last edited on 29 November 2020, at 04:49. [20][21], A review by Herndon, Ash, and Pollin of her widely cited paper with Rogoff, "Growth in a Time of Debt", argued that "coding errors, selective exclusion of available data, and unconventional weighting of summary statistics lead to serious errors that inaccurately represent the relationship between public debt and GDP growth among 20 advanced economies in the post-war period". They have one son. Carmen Reinhart, a professor of economics and finance at Harvard´s Kennedy School of Government, says the fallout from the COVID-19 outbreak is coupled with a global oil price war. But if they don’t say that, and every country’s left on its own to work something out, I think we get back to my Covid-19 hospital analogy where the system just gets overwhelmed. KR: Of course, the “Fed lower forever” is part of it. The world will follow a path similar to the 2008 global financial crisis, only worse, Reinhart and her husband, Vincent Reinhart, the chief economist at Standish Mellon Asset Management, write in the forthcoming issue of Foreign Affairs magazine. Itâs a very busy period even though youâre always at home. That doesn’t imply that per capita incomes are going to go back in V-shape to what they were before. "Sovereign Debt Relief and Its Aftermath." She made it a flawless process by finding a buyer and negotiating a contract with us within a week. (2009). Selected publications. That hasn’t materialized. The Group of 20 has already agreed to freeze bilateral government loan repayments for low-income nations until the end of 2020. Kenneth Rogoff and Carmen Reinhart. In terms of growth and productivity, they will be lasting negative shocks, and demand may come back. BLOOMBERG MARKETS: How are you faring during the lockdown? [18], In a normal recession such as 1991 or 2000, the Keynesian tools of tax cuts and infrastructure spending (fiscal stimulus), and lowered interest rates (monetary stimulus), will usually right the economic ship in a matter of months and lead to recovery and economic expansion. We were on track for that anyway. She is also a member of American Economic Association, Latin American and Caribbean Economic Association,[6] and the Association for the Study of the Cuban Economy. Carmen M. Reinhart - Solving Historyâs Puzzles. If you look at U.S. unemployment claims in six weeks, we’ve had [job losses that] took 60 weeks in terms of the run-up. So we wanted to be close to family. When you have, as we do today, very fragmented markets, markets that became totally illiquid, I think the way I would deal with that would not be through making rates more negative, but by an approach closer to the one taken by the Fed, which is through a variety of facilities that provide directed credit. Carmen Reinhart and Kenneth Rogoff at Ms. Reinhartâs Washington home. We’re talking about economies shrinking by 25% to 30%. KR: It’s fiscal policy that they’re doing in this emergency situation. When this crisis began to morph from a medical problem into a financial crisis, then it was clear we were going to have more hysteresis, longer-lived effects. But a lot of the firms aren’t coming back. Another reason I think the V-shape story is dubious is that we’re all living in economies that have a hugely important service component. Even the serious recession of 1982, which Blinder states "was called the Great Recession in its day", fits comfortably within this category of a typical recession, which will respond to the standard tools. Let me just point out another issue in terms of the policy response. Reinhart, Carmen M., Vincent Reinhart, Christoph Trebesch. The blanket coverage by the Fed is broad, and that is driving the market. The other thing that I like to highlight that is very different is how sudden this has been. It’s the choice that had to be taken to try to protect ourselves. They have one son. She and her husband are impeccable economists. That’s a shame because I think that would have been a valuable instrument, and would have been helpful for some municipals and corporates, and would have reduced the number of patients going into bankruptcy court. The first book is Carmen Reinhart's This Time Is Different: Eight Centuries of Financial Folly. So there is a policy option that we have and I think most countries have. And I think if you take away the globalization, you probably take away some of the technology. I think a lot of it. Indeed, economist Paul Krugman argued that even the combination of the Oct. 2008 bailout plus the Feb. 2009 bailout did not go big enough, although Blinder states that they were large compared to previous bailouts. I think if they can average 1% growth the next two, three years, then that will look good. [3] and Professor of Economics and Director of the Center for International Economics at the University of Maryland. The recovery is unlikely to be V-shaped, and we’re unlikely to return to the pre-pandemic world. The rest of the world is going to be in recession. Vincentâs brother lives in this area. That’s a very real possibility given past pandemics and if there’s no vaccine. Reinhart on This Time Is Different. Our son lives in this area. KR: It’s not a free lunch, but there was no choice. The largest official creditor by far is China. It turns out this time really is different. KENNETH ROGOFF: I’m with my wife and 21-year-old daughter in our house in Cambridge, quarantining, so to speak. The market sees essentially zero chance of ever having inflation again. It potentially also envelops Spain. Itâs a very busy period even though youâre always at home. CR: Yes. But Italy, as I said, is on a different scale than the peripheral countries that got into the biggest trouble in the last crisis. So the hit to emerging markets is just very broad. We came to Florida, where weâve had a house for a ⦠The International Monetary Fund is already warning that the outlook has deteriorated since it predicted in April that the world economy would shrink 3% this year. Monetary policy is essentially castrated by the zero bound. Vincentâs brother lives in this area. What’s the efficiency of the people who are working? If the G-20 says it’s in the global interest that debt moratoria be widely respected by all creditors for the next year, then that carries a lot of force, even in U.S. courts. Carmen M. Reinhart (née Castellanos, born October 7, 1955) is a Cuban-born American economist and the Minos A. Zombanakis Professor of the International Financial System at Harvard Kennedy School. KR: We don’t know where we will come out. So 3% growth in that, with that Europeanizing of their population dynamics, would not be bad at all. [11], She has written and published on a variety of topics in macroeconomics and international finance, including: international capital flows, capital controls, inflation and commodity prices, banking and sovereign debt crises, currency crashes, and contagion. So we wanted to be close to family. Reinhart and Rogoff published another paper, Debt Overhangs, Past and Present, which they co-authored with Vincent Reinhart, Carmen Reinhartâs husband. [1] After Reinhart passed her field examinations, she was hired as an economist by Bear Stearns and rose to the investment bank's chief economist three years later. KR: Certainly the global nature of it is different and this highlights the speed. (1999). BM: So what does the economic recovery look like? [4], This biography of a living person is in the category. We’ve not mentioned Italy, and that brings us to the euro zone. Many ⦠I don’t know how we’re coming back to 2019 levels [in the economy] in any near term. You really can’t use that experience as any template for this. 2 PDF version. It’s a very busy period even though you’re always at home. By most metrics the U.S. was at or near full employment. So central banks all over the world are using the fiscal side of their balance sheet. Husband of Carmen Reinhart, who co-wrote âThis Time is Different.â with Kenneth Rogoff. The professors, whose 2009 book showed that financial crises often follow similar patterns, spoke to us about what's happening in 2020. She is ⦠Adds IMF warning in second paragraph. (2010) ". I would say, looking at it now, five years would seem like a good outcome”. An earlier version of this story gave an incorrect year in the fourth answer from Kenneth Rogoff. I think you would have been laughed at if you really brought up the issue of central bank independence in the context of either world war. She has served on the editorial boards of The American Economic Review, the Journal of International Economics, International Journal of Central Banking, among others. They [the emerging markets] had a “good” crisis in 2008, but they’re not going to this time, regardless of how the virus hits them. CARMEN REINHART: My husband and I are among the lucky ones because we can work from home. I think we’re going to see a lot of work for bankruptcy lawyers going across a lot of industries. But certainly the aggressive crisis response reflects lessons learned in 2008. I think that’s changing because of the collapse in oil price. So that’s a big game changer, discounting futures. And let’s remember, their population dynamic is completely changing. So the abruptness and the widespread shutdowns we had not seen before. The first lady who helped a great deal was Lora Skeahan and her husband Charlie. So I think that if you were to ask me about an advanced economy debt issue, I think that is where it is most at the forefront. CARMEN REINHART: My husband and I are among the lucky ones because we can work from home. That’s not a bad prediction for China. I liken the incident we’re in to The Wizard of Oz, where Dorothy got sucked up in the tornado with her house, and it’s spinning around, and you don’t know where it will come down. "Global Cycles: Capital Flows, Commodities, and Sovereign Defaults, 1815â2015." Reinhart met her future husband, Vincent Reinhart, when they were classmates at Columbia University in the late 1970s. The work argued that debt above 90% of GDP was particularly harmful to economic growth, while corrections have shown this is not the case, and that the negative correlation between debt and growth does not increase above 90% as their work had contended. The shock has disrupted supply chains globally and trade big-time. Finance & Development, June 2013, Vol. There is no chance inflation will go up. Clearly that has been completely replaced by a view that rates are zero now and that they’re going to stay low for a very long, long, indeterminate period of time, with a lot of liquidity support from the Federal Reserve. They settled in Pasadena, California, during the early years before moving to South Florida, where she grew up. During the early days of the coronavirus pandemic, in March 2020, Guayaquil, Ecuadorâs business capital of some three million people, was in trouble. China came into this with inflation running over 5% because of the huge spike in pork prices. Previously, she was the Dennis Weatherstone Senior Fellow at the Peterson Institute for International Economics. You can quibble between the European style of trying to preserve firms and workers in their current jobs and the U.S. version, which is to try to address it as a natural catastrophe and try to subsidize people but allow higher unemployment. The trio looked at 26 advanced economies where the public debt-to-GDP ratio exceeded 90% for at least five years. Kenneth Rogoff, and Carmen Reinhart. We came to Florida, where weâve had a house for a decade. And it was the peripheral Europe debt problem with Portugal, Ireland, Iceland—most notoriously Greece—having the largest, by a huge margin, IMF programs in history. As an analogy, the IMF or Chapter 11 bankruptcy is very good at dealing with a couple of countries or a couple of firms at a time. And those [declines] are just staggering compared to the debt burden costs, whatever they are. American Economic Review 100.2: 573â78. The authors became the go-to experts on the history of government defaults, recessions, bank runs, currency sell-offs, and inflationary spikes. My husband and I worked with Carmen to sell our condo in Saline. February 2012 at 10:03. And then there are the socio-political ramifications. And yet a little more than a decade later, we’re experiencing what appears to be a one-of-a-kind crisis. Carmen Reinhart (1955-) ... She authored a book named "The Economics of Industry" with her new husband Alfred Marshall, who became of the very most influential economists in history. I also feel the markets have a very sanguine view of the virus and what’s going to happen and how quickly we can return to normal or maybe how quickly we will choose to return to whatever normal is. “If it drags on, the forces that are pulling the euro zone apart are going to grow stronger and stronger.”. How else do we deal with what developing and emerging economies owe? CR: I actually wanted to go back to the Italy issue. Everything seemed to be part of a predictable pattern. And part of the story is debt. But a couple of years later, the focus had moved from the banking problem to the debt problem. Reinhart met her husband, Vincent Reinhart, when they were classmates at Columbia University in the late 1970s. And I don’t know how long it’s going to take us to get back to the 2019 per capita GDP. KR: We argued at the time that the right recipe was to involve writedowns of the southern European debts. CR: Central banks were the arm of financing during two world wars, without question. South Africa is in terrible shape. But what lies at the other end? But there’s a big-picture question about their huge centralization, which is clearly an advantage in dealing with the national crisis but maybe doesn’t provide the flexibility over the long term to get the dynamism that at least you’ve got in the U.S. economy. Cinemas? 50, No. Our son lives in this area. By a twist of fate, more than 20,000 Ecuadorians had just returned home from their seasonal vacations. Graciela L. Kaminsky and Carmen Reinhart. KR: It’s a little bit as if you were in a war and saying, “I’m not going to grade how you’re doing on the battlefield. Many ⦠Carmen M. Reinhart is Professor of Economics and Director of the southern European.... Ll be more inward-looking, self-sufficient in food bank post Ireland, and institution... 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