And then you have the many forces that have led to very low inflation maybe going into reverse, either because of deglobalization or because workers will strengthen their rights. My husband and I worked with Carmen to sell our condo in Saline. Moreover, since interest rates were already near zero, the standard monetary tool of lowering rates was not going to provide much help. We came to Florida, where we’ve had a house for a decade. And because of this debt, the normal tools of tax cuts and increased infrastructure spending were somewhat less available and/or politically difficult to achieve. It’s probably going to be, at best, a U-shaped recovery. [22][23][24], Reinhart met her husband, Vincent Reinhart, when they were classmates at Columbia University in the late 1970s. How else do we deal with what developing and emerging economies owe? and Professor of Economics and Director of the Center for International Economics at the University of Maryland. The article was written before Reinhart was named to her World Bank post. And yet a little more than a decade later, we’re experiencing what appears to be a one-of-a-kind crisis. And you want to talk about a negative productivity shock, too. I go back to my Wizard of Oz analogy. Contact Us. For the G-20 initiative, I indeed hope it is the G-20 and not just the G-19. The largest official creditor by far is China. On the issue of negative interest rates, I do not share Ken’s views on that particular matter. Reinhart called her early life a “typical American immigrant story.” Born Carmen Castellanos, she and her parents fled what they perceived as an increasingly dangerous situation in Cuba in 1966. 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. Peterson Institute for International Economics, "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems", "Professor Carmen Reinhart Joins Harvard Kennedy School Faculty", "Reinhart, Rogoff... and Herndon: The student who caught out the profs", "Carmen Reinhart Appointed as World Bank Group Chief Economist", "They Did Their Homework (800 Years of It)", "Romer roundtable: Debt will keep growing", "Don't Buy the Chirpy Forecasts: The history of banking crises indicates this one may be far from over", "Playing Down the Price Tag of the Fiscal Stimulus", Foresight: The International Journal of Applied Forecasting, "What Did We Learn from the Financial Crisis, the Great Recession, and the Pathetic Recovery?,", "How Much Unemployment Was Caused by Reinhart and Rogoff's Arithmetic Mistake? That doesn’t imply that per capita incomes are going to go back in V-shape to what they were before. We’ve not mentioned Italy, and that brings us to the euro zone. In December 2018, Reinhart received the King Juan Carlos Prize in Economics and Nabe's Adam Smith Award. [1] In the 1990s, she held several positions in the International Monetary Fund. The true fall in GDP, economic historians will debate for years. But a lot of the firms aren’t coming back. I don’t think you just break and re-create supply chains at the drop of a hat. They have one son. And there was the shift to Zoom, which created more work because you’re trying to prepare differently and do your lectures differently. 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. KR: We don’t know where we will come out. 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. Among economists, they are heavy hitters. This Time Is Different: Eight Centuries of Financial Folly reminded readers that the catastrophic 2008-09 credit crisis was far from unique. A lot of people don’t properly understand that governments own the central banks. I would say, looking at it now, five years would seem like a good outcome out of this. But who can they export to? And let’s remember, their population dynamic is completely changing. If you look at the year 1918, when deaths in the U.S. during the Spanish influenza pandemic peaked, that’s 675,000. BM: What about the debts in the major economies, given they have been run up so aggressively? So certainly we would strongly endorse doing what governments are doing. I would point out that Greece, Ireland, and Portugal combined are a little over a third of Italian GDP. But I’m saying that then your settling point is going to be lower than 6%. From 2001 to 2003, she returned to the International Monetary Fund as deputy director at the Research Department. “The nineteenth and early twentieth centuries were filled with depressions,” write the husband-and-wife Reinharts. You really can’t separate the fiscal story and the debt story from the monetary story in extreme periods. And you have to deal with cash hoarding. [16], She also has written monthly columns for international media organization Project Syndicate since 2014. CR: There is talk on whether it’s going to be a W-shape if there’s a second wave and so on. It’s a very … Reinhart met her husband, Vincent Reinhart, when they were classmates at Columbia University in the late 1970s. That’s where our social, political, economic system is at the moment. Vincent’s brother lives in this area. 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. And when the central bank uses its balance sheet, it’s acting as an agent on behalf of the government, whether it’s doing maturity transformation, which is what pure quantitative easing is, when it buys long-term debt, [or] it’s doing subsidies to the private sector by buying mortgages, by intervening in corporate debt, by intervening in municipals. CR: How much of the resilience, if not ebullience, in the market is policy driven? Our son lives in this area. If you look at capital flows to emerging markets, the same story. "Global Cycles: Capital Flows, Commodities, and Sovereign Defaults, 1815–2015." 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. Can you imagine the Chinese state having the capacity to shut down Hubei province? [1] After her B.A., Reinhart worked for her master's degree in Philosophy, eventually receiving this degree in 1981 from Columbia University. That hasn’t materialized. Reinhart and Rogoff published another paper, Debt Overhangs, Past and Present, which they co-authored with Vincent Reinhart, Carmen Reinhart’s husband. The rest of the world is going to be in recession. KR: Certainly the global nature of it is different and this highlights the speed. In an op ed essay in Sunday’s Washington Post, Carmen Reinhart and her husband, Vincent, a former top Federal Reserve economist now at … Patrick R. Sullivan 14. Her work is featured in the financial press, including The Economist,[12] Newsweek,[13] The Washington Post,[14] and The Wall Street Journal. 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. World Bank chief economist Carmen Reinhart. It potentially also envelops Spain. How do we know which retailers are going to come back? And part of the story is debt. It’s very possible that the path was toward rising interest rates. It’s a very busy period even though you’re always at home. Our son lives in this area. So we wanted to be close to family. 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. 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. Our son lives in this area. 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. So there are going to be phenomenal frictions coming out of this wave of bankruptcies, defaults. CR: The problem in emerging markets goes beyond the poorest countries. 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. There’s a lot of uncertainty, and it’s probably not in the pro-growth direction. Our son lives in this area. It’s a very busy period even though you’re always at home. In those cases, economic growth slowed for an average duration of 23 years, and An earlier version of this story gave an incorrect year in the fourth answer from Kenneth Rogoff. And those [declines] are just staggering compared to the debt burden costs, whatever they are. Kenneth Rogoff, and Carmen Reinhart. Let’s take monetary policy before the pandemic. So the dominant economic model at the time was war production. According to Research Papers in Economics (RePec). There is no chance inflation will go up. 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. What’s the efficiency of the people who are working? Kenneth Rogoff, and Carmen Reinhart. BLOOMBERG MARKETS: How are you faring during the lockdown? Michael Lewis, Carmen Reinhart and Kenneth Rogoff, James Galbraith — they, and other economists, have all provided visceral insights into what unfolded. [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. A Critique of Reinhart and Rogoff", "The spreadsheet error in Reinhart and Rogoff's famous paper on debt sustainability", "Researchers Finally Replicated Reinhart-Rogoff, and There Are Serious Problems", Learn how and when to remove this template message, https://en.wikipedia.org/w/index.php?title=Carmen_Reinhart&oldid=991266962, University of Maryland College of Behavioral and Social Sciences people, University of Maryland, College Park faculty, Wikipedia articles in need of updating from September 2020, All Wikipedia articles in need of updating, Pages using infobox economist as a module, Wikipedia articles with BIBSYS identifiers, Wikipedia articles with CANTIC identifiers, Wikipedia articles with SUDOC identifiers, Wikipedia articles with WORLDCATID identifiers, Creative Commons Attribution-ShareAlike License. Private family services will be held at Esterdahl Mortuary, Moline, and she will be laid to rest next to her beloved husband, … We really can’t look independently at central banks without also looking at the balance sheet, not just of the government, but the balance sheet of the private sector, which has a lot of contingent liabilities. I hope Bernanke isn’t re-appointed, or declines if offered. So we wanted to be close to family. Directed by: Professor Carmen M. Reinhart and Professor Carlos Vegh Department of Economics This dissertation attempts to address the elusive concept of “graduation”, that is the emergence from frequent crisis suffering status. China needs to be on board with debt relief. Carmen Reinhart, together with her fellow economics professor Kenneth Rogoff, wrote the highly acclaimed…This Time Is Different: Eight Centuries of Financial Folly. Carmen M. Reinhart is Professor of Economics and Director of the Center for International Economics at the University of Maryland. Is this time different? So we use a much more modest version of recovery. Vincent’s brother lives in this area. And then there are the socio-political ramifications. Think about China. Journal of the European Economic Association 14.1 (February 2016): 215–251. It contains two chapters. Graciela L. Kaminsky and Carmen Reinhart. BM: So what does the economic recovery look like? In both 2011 and 2012, she was included in the 50 Most Influential ranking of Bloomberg Markets. Again, we’re going to see huge forces pulling apart the euro zone. February 2012 at 10:03. So pandemics are not new. 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 … [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. [18], By contrast, the 2008 near-meltdown destroyed parts of the financial system and left other parts reeling and in serious need of de-leveraging. KR: We argued at the time that the right recipe was to involve writedowns of the southern European debts. If you look back to 2008-09, nearly everybody had a banking crisis. That, by the way, is really not the Wall Street definition of recovery, where recovery is going back to where the trend was. I think a lot of it. In terms of growth and productivity, they will be lasting negative shocks, and demand may come back. We came to Florida, where we’ve had a house for a decade. She is … [4], This biography of a living person is in the category. The Covid-19 pandemic has catapulted the world into its deepest recession since the Great Depression, provoking an unprecedented fiscal and monetary response. It’s a very busy period even though you’re always at home. Everything seemed to be part of a predictable pattern. (2010) "Growth in a Time of Debt." It’s hard to say in China what is public and what is private, but corporates in China levered up significantly, expecting that they were going to continue to grow at double digits forever. There is no debate that they should be doing all they can to try to maintain political and social cohesion, to maintain economies. [7], On May 20, 2020, Reinhart was appointed World Bank Chief Economist, starting on June 15, 2020.[8]. [18], Recovery from what Blinder terms a Reinhart-Rogoff recession may require debt forgiveness, either directly or implicitly, by encouraging somewhat higher than normal rates of inflation. Large amounts of governmental debt, household debt, corporate debt, and financial institution debt were left in its wake. In 2008 it was the rich countries and not the emerging markets. It’s not just the people not working. “I don’t know how long it’s going to take us to get back to the 2019 per capita GDP. She has served on the editorial boards of The American Economic Review, the Journal of International Economics, International Journal of Central Banking, among others. Born in Havana, Cuba, Reinhart arrived in the United States on January 6, 1966, at the age of 10, with her mother and father and three suitcases. BM: What is the appetite at the IMF for coming to the rescue? These are big emerging markets. Also you probably need a debt moratorium that’s fairly widespread for emerging markets and developing economies. To feed nearly 60 million people, give them food and water and concentrate medical attention? 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. She received her Ph.D. from Columbia University. It’s certainly different from prior pandemics in terms of the economy, the policy response, the shutdown. It’s obviously a surreal experience overall. CR: Chinese growth has always been very outward-looking, very propelled by export-led growth. graduate teaching at FIU,[10] Reinhart in 1978 went on to attend Columbia University graduate school. For many emerging markets, we’ve also had a massive, massive oil shock. We came to Florida, where we’ve had a house for a … Kennedy is executive editor for Bloomberg Economics in London. Reinhart, Carmen M., and Christoph Trebesch. But Italy, as I said, is on a different scale than the peripheral countries that got into the biggest trouble in the last crisis. 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. 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. The trio looked at 26 advanced economies where the public debt-to-GDP ratio exceeded 90% for at least five years. KR: It’s fiscal policy that they’re doing in this emergency situation. It seems very uncertain to me. 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. That’s one difference. If the euro zone doesn’t find a way to deal with this, maybe eurobonds might be in the picture to try to indirectly provide support. What this does mean is that the market is really counting on a lot of rescues. So that affects not just trade, but movements and people. Reinhart, Carmen M., Vincent Reinhart, Christoph Trebesch. KR: It’s not a free lunch, but there was no choice. 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. Adds IMF warning in second paragraph. [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. And there are many ways this feels more like the Great Depression. Reinhart, Carmen M., and Christoph Trebesch. Reinhart, Carmen, and Vincent Reinhart. We’ll be more inward-looking, self-sufficient in medical supplies, self-sufficient in food. KR: There will be a pretty sustained growth slowdown in China. American Economic Review 100.2: 573–78. But a couple of years later, the focus had moved from the banking problem to the debt problem. But selling it as a free lunch, that’s stupefyingly naive. Let me just point out another issue in terms of the policy response. The economic policy response has been massive and absolutely necessary. We’re going to see a lot of risk aversion. By a twist of fate, more than 20,000 Ecuadorians had just returned home from their seasonal vacations. U.S. unemployment was at its lowest level since the 1960s. The other thing that I like to highlight that is very different is how sudden this has been. Foreign Affairs 97.6 (November/December 2018): 84–97. The reversal in capital flows in the four weeks ending in March matched the decline during the [2008-09] global financial crisis, which took a year. If China is not fully on board on granting debt relief, then the initiative is going to offer little or no relief. 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 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. To figure out what might be next, Bloomberg Markets spoke to Reinhart, a former deputy director at the IMF who’s now a professor at the Harvard Kennedy School, and Rogoff, a former IMF chief economist who’s now a professor at Harvard. When the family moved to Miami, Reinhart started college at two-year Miami Dade College, before transferring to Florida International University, where she received a B.A. You really can’t use that experience as any template for this. [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. I would say, looking at it now, five years would seem like a good outcome”. She has testified before Congress and is listed among Foreign Policy's Top 100 Global Thinkers, Thompson Reuters' The World's Most Influential Scientific Minds, and Bloomberg Markets Most Influential 50 in Finance. She and her husband are impeccable economists. So I do think we are going to see more stimulus from China. The authors, husband and wife economists Vincent and Carmen Reinhart, take a close, quantitative look at the 21-year period surrounding financial … And my own view is that neither of those are likely to be true. So we wanted to be close to family. We came to Florida, where we’ve had a house for a decade. 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. 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). So the hit to emerging markets is just very broad. 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. The first lady who helped a great deal was Lora Skeahan and her husband Charlie. "Sovereign Debt Relief and Its Aftermath." [1] In 1988 she returned to Columbia to obtain her Ph.D. under the supervision of Robert Mundell. I don’t think we’ll return to their precrisis normal. KR: In our book, Carmen and I use the definition of recovery as going back to the same income as the beginning. But wisdom helps discern a crisis before it begins – before it metastasises through our politics, our economies and our country. Finance & Development, June 2013, Vol. ", "Rogoff and Reinhart defend their numbers", "Does High Public Debt Consistently Stifle Economic Growth? Reinhart and her husband Vincent, a resident scholar at the American Enterprise Institute in Washington, recently compared major global meltdowns since the 1929 stock market crash. And I think that’s very wrong. Obviously, this has been done to differing degrees of effectiveness in different countries, with Asia reacting much quicker and with much better near-term outcomes than Europe and the U.S. BM: How do you regard the economic policy response? BM: There is some question over the future path of inflation. [9], Recommended by Peter Montiel, an M.I.T. But I don’t think the U.S. is by any means all-in, and a lot of the contracts of the private sector are governed under U.S. law. They’re actually not that different. [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. The authors became the go-to experts on the history of government defaults, recessions, bank runs, currency sell-offs, and inflationary spikes. So I think the settling point for Chinese growth is going to be well below 6%. I wonder if the Reinharts ever argue about economics. The Journal of Economic Perspectives 30.1 (January 2016): 3-27. She and her husband … Reinhart is ranked among the top economists worldwide, based on publications and scholarly citations. Real GDP that year grew 9%. Illustrator: Marta Zafra for Bloomberg Markets. Vincent’s brother lives in this area. Vincent’s brother lives in this area. You can’t imagine trying to get these same subsidies passed through the Senate and the House in real time. Vincent’s brother lives in this area. (2009). 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. And I think if you take away the globalization, you probably take away some of the technology. We came to Florida, where we’ve had a house for a decade. 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. The recovery is unlikely to be V-shaped, and we’re unlikely to return to the pre-pandemic world. I think if they can average 1% growth the next two, three years, then that will look good. In a paper co-authored with her husband, the economist Vincent Reinhart, Carmen Reinhart looked at the aftermath of the 15 post-World War II financial crises. [1] They have one son. So we wanted to be close to family. That’s not a bad prediction for China. This is very, very destructive within the euro zone. It’s the choice that had to be taken to try to protect ourselves. But at the end of this, I think we’re going to have experienced an extremely negative productivity shock with deglobalization. And still, with postwar financial crises before 2008-09, the average was four years, and for the Great Depression, 10 years. And I think that would have been cheap money in terms of restoring growth in the euro zone and would have [been] paid back. The policy response is also different. 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. KR: The IMF at this point is all-in on trying to find a debt moratorium, recognizing there’s going to be restructuring in a lot of places. 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