Location : Wasted Space Job/hobbies : Cayman Islands Actuary
Subject: Empires on the edge of ruin Mon Jul 26, 2010 3:41 am
When the emails started going out that Niall Ferguson was coming to Australia to deliver a big address in Sydney on Wednesday, tickets to the dinner sold out quickly. Many more people want to attend than could be accommodated.
Ferguson is not just a superstar within the international intellectual elite; the theme of his speech is sweeping in its scale and implications - ''Empires on the edge of ruin''. He will not be just talking about the past, but also the present.
He even evokes the word ''epoch''. As a professor of history at Harvard University and the Harvard Business School, Ferguson has scanned the economic data over hundreds of years and come to this conclusion: ''I think it is reasonable to assume that we are living through the end of an epoch . . . Something that is really the end of 500 years of history . . . The great question is whether I'm right in believing that we're living through the end of the pre-eminence of the West . . . and the end of Western civilisation as we know it. This is a huge secular shift.''
The global financial crisis and recession had exposed and accelerated this shift, he told a private conference at Coolum in Queensland on Saturday (having arrived from London the day before). ''We are watching the disintegration of Europe,'' he said. Observing this process is like watching ''a fascinating real-time train wreck''.
The sovereign debt crisis in Europe, the US and Japan is, he says, ''far from over. The situation is dire''. But not in Australia. Instead, he posits a different challenge for this country: ''We are shifting into an era of Asian dominance . . . Australia is effectively part of the Chinese economy . . . Do you want to be a colony of the Chinese empire?''
I can thank a debt of love for the fact that I was able to meet, interview and listen to Ferguson at the weekend. Accompanying him to Australia is his partner, Ayaan Hirsi Ali, the Dutch-Somali former Muslim who still requires a bodyguard after numerous attempts on her life (one hovering discreetly nearby throughout the weekend conference, even in a benign Coolum resort).
They were introduced by Greg Lindsay, the head of the Australian think tank, the Centre for Independent Studies, during a conference in New York. Ferguson is repaying this great favour by coming to Australia to be a keynote speaker at the Consilium conference, which the centre runs in Coolum each year, and deliver the annual Bonython lecture for the Centre for Independent Studies on Wednesday.
He and Hirsi Ali make quite a match. She has become one of the most famous feminists in the world and Ferguson is the most famous economic historian. Both have new books just published.
Tomorrow, Ferguson will pick up another laurel, an honorary doctorate from Macquarie University. He can add that to the double professorships at Harvard, which poached him from Oxford University, where he was a star. He has also written seven books, several of them bestsellers, and is a senior fellow at Stanford University's Hoover Institute and a contributing editor for the Financial Times. He will soon extend his franchise to television, writing and fronting a documentary series to be broadcast next year. He is only 46.
The TV series will be about the ascent of European economic power. An obvious sequel could be about the descent of European power. Ferguson describes Europe's and America's debt position as ''fundamentally unsustainable''.
In the long march of history, a return to primacy by China would be logical. ''In 1420,'' he says, ''you could not have predicted the ascent of the West. London was one-tenth the size of Beijing . . . Europe was a collection of warring little kingdoms.''
Not everyone is enamoured with Ferguson. For some time he has engaged in a celebrated debate with the most recent Nobel laureate in economics, Paul Krugman, the economics columnist for The New York Times. At the weekend Ferguson described their skirmishing as ''a sometimes ill-tempered debate''.
Krugman is an advocate of classic Keynesian stimulus by big government to ride out the downturn. But Ferguson believes we have passed the point where deeply indebted governments can rely on yet more stimulus. He wants a gradual deflating of the debt balloon and more expansive monetary policy. He worries more about deflation than inflation.
While Krugman is an economist, Ferguson is an economic historian. It is a significant difference. ''Financial history can illuminate our experiences better than any economic model,'' he says.
His point is helped by the failure of most economics prognosticators to anticipate the near-meltdown of the global financial markets in 2008 and the near-depression this caused.
Having come to Australia, Fergusion is taking pleasure at being in an English-speaking country where the economy is sound and the mood is optimistic.
''You have a fantastic opportunity to do things that other Anglo-Saxon countries can only dream of. You should be setting up a sovereign wealth fund like Norway,'' he says. This would serve as a buffer to the inevitable downturn in the global commodities market and any stumbles by China. ''You had the golden opportunity, but it was frittered away in a pseudo-Keynesian spending binge.''
So much for Kevin Rudd's and Julia Gillard's claim to have saved Australia from the global economic crisis. The world's most famous economic historian has just given them an F.
Subject: Re: Empires on the edge of ruin Wed Jul 28, 2010 11:21 pm
Fergusun is a smart person but not that smart. just reading what he seems to believe i see his ignorance. Either that or he is lying and misrepresenting the situation. He seems to be missing many key points.
It has lots of holes.
RR Phantom
Location : Wasted Space Job/hobbies : Cayman Islands Actuary
Subject: Re: Empires on the edge of ruin Thu Jul 29, 2010 4:26 am
Decline and fall of the US
In the history of empires the end is abrupt, and those that rely on them need to be ready.
All empires, no matter how magnificent, are condemned to decline and fall. We tend to assume that in our own time, too, history will move cyclically - and slowly.
The environmental or demographic threats we all talk about seem remote. In an election year, who really cares about the average atmospheric temperature or the age structure of the population in 2050?
Yet it is possible that this whole cyclical framework is, in fact, flawed. What if history is arrhythmic - at times almost stationary, but also capable of accelerating suddenly, like a sports car? What if collapse comes suddenly, like a thief in the night?
Great powers and empires operate somewhere between order and disorder. They can appear to operate quite stably for some time; they seem to be in equilibrium but are, in fact, constantly adapting. But a small trigger can set off a ''phase transition'' from a benign equilibrium to a crisis - a butterfly flaps its wings in the Amazon and brings about a hurricane in south-eastern England.
Regardless of whether it is a dictatorship or a democracy, any large-scale political unit is a complex system. Most great empires have a nominal central authority - either a hereditary emperor or an elected president - but in practice the power of any individual ruler is a function of the network of economic, social and political relations over which he or she presides.
As such, empires exhibit many of the characteristics of other complex adaptive systems - including the tendency to move from stability to instability quite suddenly. But this fact is rarely recognised because of our addiction to cyclical theories of history.
The Bourbon monarchy in France passed from triumph to terror with astonishing rapidity. French intervention on the side of the colonial rebels against British rule in North America in the 1770s seemed like a chance for revenge after Great Britain's victory in the Seven Years War a decade earlier, but it served to tip France into a critical state.
In May 1789, the summoning of the Estates-General, France's long-dormant representative assembly, unleashed a political chain reaction that led to a swift collapse of royal legitimacy in France. Only four years later, in January 1793, Louis XVI was decapitated by guillotine.
The sun set on the British Empire almost as suddenly. So, what are the implications for the United States today?
The most obvious point is that imperial falls are associated with fiscal crises - sharp imbalances between revenues and expenditures, and the mounting cost of servicing a mountain of public debt.
Think of Ottoman Turkey in the 19th century: debt service rose from 17 per cent of revenue in 1868 to 32 per cent in 1871 to 50 per cent in 1877, two years after the great default that ushered in the disintegration of the Ottoman Empire in the Balkans. Consider Britain in the 20th century. By the mid 1920s, debt charges were absorbing 44.5 per cent of total government expenditure, exceeding defence expenditure every year until 1937, when rearmament finally got under way in earnest.
But Britain's real problems came after 1945, when a substantial proportion of its immense debt burden - equivalent to about a third of gross domestic product - was in foreign hands.
Alarm bells should therefore be ringing loudly in Washington, as the US contemplates a deficit for 2010 of more than $US1.47 trillion - about 10 per cent of gross domestic product, for the second year running.
Since 2001, in the space of just 10 years, the US federal debt in public hands has doubled as a share of GDP from 32 per cent to a projected 66 per cent next year. It is projected that debt could reach 344 per cent by 2050.
These sums may sound fantastic. But more terrifying is to consider what continuing deficit finance could mean for the burden of interest payments as a share of federal revenues - up to 85 per cent in 2050.
The fiscal position of the US is worse than that of Greece. But Greece is not a global power. In historical perspective, unless something radical is done soon, the US is heading into into Bourbon France territory. It is heading into Ottoman Turkey territory. It is heading into postwar Britain territory.
For now, the world still expects the US to muddle through, eventually confronting its problems when, as Winston Churchill famously said, all the alternatives have been exhausted. With the sovereign debt crisis in Europe combining with growing fears of a deflationary double-dip recession, bond yields are at historic lows. There is therefore a strong incentive for those in the US Congress to put off fiscal reform.
Remember, half the US federal debt in public hands is in the hands of foreign creditors. Of that, a fifth (22 per cent) is held by the monetary authorities of the People's Republic of China, down from 27 per cent in July last year. China now has the second-largest economy in the world and is almost certain to be America's principal strategic rival this century, particularly in the Asia-Pacific region.
Quietly, discreetly, the Chinese are reducing their exposure to US Treasury bonds. Perhaps they have noticed what the rest of the world's investors pretend not to see - that the US is on an unsustainable fiscal course, with no apparent political means of self-correcting.
That has profound implications not only for the US, but also for all countries that have come to rely on it, directly or indirectly, for their security.
Subject: Re: Empires on the edge of ruin Thu Jul 29, 2010 5:26 pm
last i knew the u.s. owed china in t's about 800 billion and japan second creditor around six hundred billion.
To put this in perspective the tarp was 750 billion.
This is most of what i consider the false premise of u.s. debt. It could theoretically pay off the balance to china tomorrow and cut a check, print the money and call it a done and over issue.
Most of the u.s. deficits are actually owed to itself. Not so much foreign creditors. And with any fiat currency owing money to oneself is a rediculous concept. The u.s. has changed currencys more than once in its history. That being said it is on a path of continuing deficits and financial instability. The question is how much.
It may inevitably lose its advantage and place as reserve currency, and most likley control over world economys. There is that possibility. However overlooked is the u.s. having such deep involvment in globalism. For the u.s. to crash it would crash world economys as well. As seen so easily in the recent fiscal crisis. Many countrys actually back their own currency with the u.s. dollar. They would suffer the same fate if the u.s. were to go under.
A complete crash didnt even exist in the soviet union. Which broke up as much over political differences as it did financial. Only to be returning now and even when down trodden maintaining more power than most nations around the globe. The u.s. is more intertwined in the global economys than the soviet union ever was. The green back is supported by a large military as well as reliant nations.
so could the u.s. crash? Yes. but it would bring the majority of the rest of the world with it. It would also most probably just redo its currency as it has done before. Perhaps pay off debts before hand (it could cut a check for what it owes china) or perhaps default as the chinese have done in the past. But one would have to seriously consider what a financial crash would mean in the united states and to what extent. It wouldn't be the extent most imagine. More than likley it would transition itself to a new currency before hand as previously done. suffer a couple decades of less than stellar standards of living (just like all the countrys that go down with it) and resurface once again similiar to the soviet union but probably quicker. And probably before the foes that went down with it.
The mistake of considering the power of china is not realizing where that power has come from. China has been built on exports. 'which die out with financial crisis. They suffer overpopulation problems. Import near everything. China is not a sustainable country without globalism at this point. what people seem to miss is where chinas growth in the last thirty years has come from. And having defaulted on its debt before china is hardly the answer to economic wisdom. chiaa is expected to hit its growth ceiling between 2020 and 2030. Even sooner if demand for its exports weans. Then it will be faced with increasing population and no growth. Similiar to the u.s. but with a larger population and less resources, and less global and military power. They cant even return all the peasants to the farm land.
On top of the above, going along with the lines of the u.s. military actually backing its currency and its resource supply. Even if the u.s. were to become a financial deficit burden who could afford to permit its decline and would it decline peacefully? The reliance on it, as well as the control extended around the globe by its military supports its financial condition as much as the actual finances. Another error. One assumes the u.s. military is afforded by its currency. Which is actually the opposite. The currency is backed by the military. Dollar has less to do with actual financial condition than it has to do with geopolitical control via globalism through financial and military power.
Subject: Empires on the edge of ruin 
Mon Jul 26, 2010 3:41 am
