Paul Krugman at war with Niall Ferguson over inflation

Historians in the News

One of them is a “poseur”. The other is “patronising”. One suffers from “verbal diarrhoea”. The other is a “whiner”.

A bust-up on the set of High School Musical 4 perhaps? A scrap behind the catwalk at a Milan fashion show? No. Those accusations were slung round in an increasingly bitter public row between two of the world’s most distinguished commentators on global finance and economics, professors Paul Krugman and Niall Ferguson, of Princeton and Harvard, respectively.

It started as an argument about bond prices. But last week it blew up into a row about racism, printing money, spending our way out of recession, and the fate of the global economy.

Academic spats can, of course, be famously catty. Ludwig Wittgenstein once tossed a poker at his fellow philosopher Karl Popper at a meeting of the Cambridge Moral Science Club as they argued about whether issues in philosophy were real or just linguistic puzzles. At least Krugman and Ferguson haven’t come to blows yet, although at their next meeting it might be better to hide the blunt instruments. Still, it is a long time since the academic world witnessed a dispute as gladiatorial as this one.

Henry Kissinger, who knows a bit about fights, both political and intellectual, once observed that the reason academic tussles were so vicious was “because the stakes are so small”. And although that is true in one sense — it doesn’t matter very much whether the professor from Princeton doesn’t like his rival from Harvard — it is wrong in another. The stakes in this row are pretty high.

The argument is about whether the huge stimulus programmes launched by governments around the world, and the way central banks are furiously printing money, are lifting the global economy out of recession. Or whether they are just teeing up the next crisis — hyper-inflation and an even worse economic collapse.

In a week in which it emerged that Mervyn King, governor of the Bank of England, wanted to print even more money, this is far more than an academic debate. It is about where long-term interest rates are going, and so whether mortgages will be affordable next year. It is about whether the glimmers of recovery seen now are about to be crushed by government spending.

“The deficits are stimulating the economy right now, but once the recovery starts they may choke it off,” said Stuart Thomson, a bond fund manager who controls assets of $100 billion at Ignis Asset Management. “That is what they are really arguing about.”

In short, it is about whether we are fixing the problems or whether we are just papering over the cracks, and so just storing up more trouble a few years down the road....

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Randll Reese Besch - 8/26/2009

Not enough spent and most of it supporting the too large criminals who committed the crimes. They should have been broken up and sold or simply dissolved and paid off those whose money was involved in it. The leaders should have gone to prison for a long time. Instead...

They need to stop pumping the blood needed for the body into the giant tumors that riddle the body. While letting the healthy cells (the rest of us) whither and die. Tumors "too large to fail" and that is why we have such a bollixed situation. The tumors will live but the body will die. And so goes the republic.