A Terrific Niall Ferguson Lecture

Steven Horwitz

I just came across a talk by Niall Ferguson from last May, given at the Peterson Institute for International Economics, that is worth your time to peruse.  You can find the audio and video as well as a transcript in PDF here.  The title is "Fiscal Crises and Imperial Collapses: Historical Perspective on Current Predicaments," and he provides an overview of the sorry state of fiscal policy and debt in the Western world.  His argument is that we are on a track of severely unsustainable debt and that by some measures the US is worse off than even the European countries.  (Canada, I might note, is the exception to almost all of this.) 

I recommend this highly and it is worth reading/watching/listening through the lens of Buchanan and Wagner's work and Pete's language of debt, debasement, and default.  If there's a punchline, it's that Ferguson seems convinced we don't have the stomach to go the austerity route, especially because it would require us to be quite austere.  Inflation is unlikely to work because bondholders are not as easily fooled as years ago.  That pretty much leaves only default and it sure seems like that's what he sees coming.

Well worth at the very least reading the transcript.

Comments

[The Cuttlefish of Cthulu]

Ferguson clearly is not familiar with Modern Monetary Theory (MMT).

[Chip Hessenflow]

Thank you for posting this. It is interesting and helpful.

[Mathieu Bédard]

I'm under the impression that here in Europe (at least in France) there currently is a semantic slip of "austerity" from decreasing public spending to increasing taxes. Much of it is probably engineered by the ruling party's political communication experts rather than attributable to a genuine linguistic faux pas. Could you say the same thing about the USA?

[Current]

Mathieu,

In Britain "Austerity" has always meant cutting spending and/or raising taxes.

[M. Walther]

re: "austerity"

The word is almost never used in the United States. We either talk about raising taxes -- or perhaps, in Pelosi-speak, allowing "tax cuts" to expire -- or cutting spending.

[Lee Kelly]

An excellent lecture by Niall Ferguson. I caught an episode of "Ascent of Money" a few weeks back, and it was also very good.

[Stephen MacLean]

Unfortunately, Globe and Mail columnist Neil Reynolds offers a far less optimistic portrait of Canada’s public debt.

Professor Ferguson’s argument (see his Foreign Affairs essay here) is very disturbing, given the fact that the collapse comes quickly and without warning (save for the fact that if a country does have a high debt to GDP ratio, the comeuppance will pounce sooner rather than later--if at all, for countries that have been financially prudent).

The double curse of this false calm is the misleading air of command and confidence with which it imbues sovereign-debt-crisis sceptics.

[Stephen MacLean]

Oops! The links didn’t come through; here they are again:

Neil Reynolds’s Globe and Mail column on Canada’s public debt: http://www.theglobeandmail.com/report-on-business/commentary/neil-reynolds/a-shameful-federal-provincial-spending-spree/article1731246/

Niall Ferguson’s Foreign Affairs essay: http://www.foreignaffairs.com/articles/65987/niall-ferguson/complexity-and-collapse

[Jerry O'Driscoll]

The first and best advice I received when I joined the Dallas Fed was to give a forecast; give a date; but never give a forecast and a date. Economists have no theory of timing.

I was on Fox Business News today and warned of parallels with Argentina. Not today; probably not tomorrow; but in 10 years?

Remember two things. First, at the turn of the 20th century, Argentina was one of the wealthiest countries in the world (#7, I think). Second, the US gov't. has defaulted before (in 1933).

Never say never.

[The Cuttlefish of Cthulu]

"Second, the US gov't. has defaulted before (in 1933)."

MMT says default is now impossible, since the US is no longer on a gold standard. What would you say in response?

[Jerry O'Driscoll]

Who is MMT?

Inflation is economically a partial default. Abrogating the inflation-protection clause in TIPS would be a defacto default.

Ireland is talking about "restructuring" its debt. That is a fancy way of saying it may not be able to meet its curent obligations.

[The Cuttlefish of Cthulu]

MMT is Modern Monetary Theory; it's chartalism, beloved of post-Keynesians.

"Inflation is economically a partial default."

I agree; I was just curious to your thoughts on the matter, I certainly don't buy into MMT (it has a pretty fanatical contingent out there).

[Coach Factory Outlet]

Drink more water. It your health~

[professional research paper writers]

This topic is very interesting for me so I'll definitely read the transcript. Thanks a lot for finding and sharing it!

[Air Jordans]

I believe that we give life its meaning