Ken, what did you smoke?

It is rare for Cliff to comment on a policy proposal so absurd that no comment is needed. But Ken Rogoff, a highly respected professor at Harvard, tends to surprise.

In his article in the German Frankfurter Allgemeine Zeitung, reproduced in English here and base for his talk at INSM, a Berlin based think tank, Rogoff argues that the most efficient way to boost the euro area periphery is to forgive their debt.

Interestingly, the article does not explain why Rogoff believes this is most efficient, other than his belief that sovereign debt holders will be happy to chip in a maturity extension, as discussed recently at the IMF. But with the cost of EFSF/ESM loans minimal and market funding buoyant, the timing of Rogoff's argument is just too bizarre. Financial intermediation is just picking up again, and flush liquidity allowed Portugal to forego bailout funds and Ireland to think about their early repayment.

Why debt forgiveness now?