In this episode of Goldman Sachs Exchanges, Allison Nathan interviews economist Ken Rogoff and historian Niall Ferguson about the fiscal situation of the United States. Both Rogoff and Ferguson express concerns about the US fiscal trajectory, citing rising real interest rates, high debt levels, and a potential shift in investor sentiment away from US treasuries and the dollar. They discuss the historical context of great powers facing fiscal challenges, the potential for a debt crisis manifesting as inflation, and the geopolitical ramifications of unsustainable fiscal policies. While acknowledging the cushion provided by the dollar's dominant global role, they caution against complacency and highlight the need for political will to address the US fiscal problem through measures like voters accepting deficit reduction, potential productivity booms from AI, or a revolution in military affairs that lowers defense costs.
