Home > Uncategorized > Rogoff on China: Was Mr. 90 Percent right again?

Rogoff on China: Was Mr. 90 Percent right again?

from Dean Baker

Andrew Ross Sorkin seems prepared to pronounce Ken Rogoff to be prescient once again with his prediction that China would run into a debt crisis. Rogoff’s past claims to prescience might be viewed as somewhat questionable. He, along with co-author Carmen Reinhardt, famously argued that countries face a severe slowdown in growth when their debt to GDP ratios exceed 90 percent. It turned out that this claim was driven by an error in an Excel spreadsheet, nonetheless it was used to justify austerity in the euro zone, the United States and elsewhere. This austerity did help to worsen the downturns caused by the collapse of asset bubbles, in effect contributing to the crisis that Sorkin credits Rogoff with predicting.

Anyhow, the jury is still out as to whether China will face a serious slump due to its market downturn, as Rogoff himself is quoted as saying in Sorkin’s piece. The prediction on which Rogoff and just about everyone else in the world has been proven correct is that China’s stock market bubble would burst. (It had risen by 150 percent between June of 2014 and June of 2015.) Rogoff does not seem prepared to say even now that this will lead to a more general collapse of China’s economy.

 


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  1. JdeV
    August 28, 2015 at 12:49 pm

    Last time I checked Carmen Reinhardt is comfortably ensconced @ Peterson Institute , sharing facilities with Anders Aslund who contributed towards Ukraines metamorphosis towards free market democracy ?!

  2. Howard Davies
    September 26, 2016 at 1:25 am

    If you want to know what an economist thinks is happening to the Chinese economy today, all you need to do is look to see what they were saying several years ago. It appears that they take a decision for or against and then stick with it no matter what. In Ken Rogoff’s case he was predicting a property market crash in China in 2010. It still hasn’t happened. It could but there are many reasons why it may not.

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