Rogoff berates Obama for giving in to Tea Party games

8th August 2011

This might be seen as bad news for the Republican party, because during the debt ceiling stand off, they used Rogoff's work to shore up many of their arguments.

 Along with Carmen Reinhart from the University of Maryland, they have argued that when debt to GDP ratios reach around more than 90 per cent it can restrain growth.

In a wide-ranging interview with Speigel, Rogoff gives his view on debt and the surrounding stock market turmoil.

Among other warnings, he suggests markets are hoping for a traditional recovery from recession, but this is simply not the case this time – this is a "post financial crisis" recovery and there will be no return to boom time soon.

He argues in favour of quantitative easing but also says America must take action on private debt, perhaps by helping out borrowers in return for them giving up some future appreciation in the value of their property.

He also is baffled by President Obama making so many concessions to the Tea Party suggested he was gamed and branding them terrorists.

He believes that Germany will have to stomach supporting Italy and Spain but that the country is correct to demand huge concessions including possibly a powerful European finance minister.

Here is how the Tea Party deployed Reinhart's arguments to argue against the debt ceiling extension.

The Tea Party may rethink the attitude to the economist, and to Reinhart, but he has other critics too.

Business Insider's Joe Weisenthal argues that the two economists are actually very dangerous. Although not right wing, their views have now form the core of a new consensus on debt supported by the IMF, but he is not sure their work is supported by the facts on the ground.

"The three countries in which the most clamor has arisen over fiscal deficits-Japan, the US, and the UK-are all characterized by record low yields on government debt, and their private sectors are engaged in deleveraging on a massive scale."

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