Emerging Markets in Tough Spot, Says Harvard Professor Reinhart

The investment opportunity many see in emerging markets is being called into question by Cuban-born economist and Harvard professor Carmen Reinhart. This according to a recent Bloomberg article. Reinhart cites debt, weakening trade terms, rising interest rates and slow growth as reasons for concern, arguing that developing nations are in fact worse off than during the 2008 global financial crisis. He makes the following points: The more tightening by the Fed, “the more the anticipation… Read More

The 90% Debt/GDP Threshold, Debunked

As America’s debt has ballooned and its debt/GDP ratio has risen, many critics have pointed to the work of Carmen Reinhart and Kenneth Rogoff as cause for alarm. The two professors’ research had found that, historically, when economies cross the 90% debt/GDP ratio threshold, growth is significantly negatively impacted. But University of Massachusetts Amherst PhD candidate Thomas Herndon recently discovered flaws in Reinhart and Rogoff’s research. Here he tells Bloomberg about the errors; when fixed,… Read More

This Recovery Isn’t Different, Say Reinhart & Rogoff

While some have argued that the U.S. economic recovery has been sub-par, Professors Carmen Reinhart and Kenneth Rogoff — whose research into the aftermaths of financial crises may be the most significant every performed — disagree. In a recent column for Bloomberg.com, Reinhart and Rogoff say “the aftermath of the most recent U.S. financial crisis has been quite typical of systemic financial crises around the globe in the postwar era. If one really wants to… Read More

The 90% Debt/GDP Threshold: Reality or Myth?

Over the past year-and-a-half, many prominent strategists have cited the research of Carmen Reinhart and Kenneth Rogoff in contending that the U.S. will be in big trouble if its debt-to-GDP ratio climbs past 90%. But Robert Huebscher, the founder of Advisor Perspectives, says they are misreading Reinhart and Rogoff’s research. The problem, Huebscher says, is that those citing the 90% threshold have “ignored Reinhart’s and Rogoff’s own words of caution with respect to the special… Read More

Ritholtz: This Recovery Isn’t Unusual — If You Use the Right Yardstick

Earlier this month, forecasters missed the mark by a wide margin on the June jobs report, far overestimating the number of jobs that would be created. And, says Barry Ritholtz, a big reason for that and other flawed forecasts during the economic recovery is simple: Analysts and economists are using the wrong historical measuring stick. “History suggests the correct frame of reference [for this recovery] is not the usual contraction-expansion cycles, but rather credit-crisis collapse… Read More