Niall Ferguson: Renews Debate with Paul Krugman Over US Stimulus
Laurence A. Tisch Professor of History at Harvard University and William Ziegler Professor at
Harvard Business School.
When I was a schoolboy in Glasgow, I suppose I was treated to the usual smorgasbord of historical subjects that
most British school children study. A few weeks of the Romans, a few weeks of ancient Britains, some Scottish
history, and then it became a little bit more serious. The Wars of the Roses, the Reign of James the VI and I,
what was then called the English Civil War, or Revolution, but these days they call it something much fancier
like the British Civil Wars (plural). And I studied the 19th and 20th centuries at school too. I’m not sure
all of these different things were terribly well connected, but I did find myself drawn more and more to the
subject the older I got. And the turning point, I think was the year—and I’m guessing my age was 15 or 16—when
I was studying Hamlet in English Literature, and the 30 Years War in history. Now the study of the play, Hamlet,
is something that everybody should undertake, and I still have fond memories of the essay I wrote on the theme of
death in Hamlet.
Originally published as part of"Big Think Interview With Niall Ferguson" 5-14-2010
My research is motivated by the feeling that historians have tended to underestimate the importance of financial
markets in modern history, and that the great upheavals of our times can be illuminated by looking at the prices of
securities, exchange rates, and other market data. These offer invaluable clues as to the expectations of
contemporaries. How did people in the past conceive of, and choose among, the various futures open to them? If
investors anticipated war or a revolution, for example, they tended to sell a country’s bonds in the expectation of
higher government deficits and inflation, or to buy defense company stocks.
Originally published as part of"Niall Ferguson illuminates historic upheavals by analyzing financial markets" The Yard Magazine (Harvard), 5-22-2008
By Niall Ferguson
In 2007 the United States needed to borrow around $800 billion from the rest of the world; more than $4 billion every working day. China, by contrast, ran a current account surplus of $262 billion, equivalent to more than a quarter of the U.S. deficit. And a remarkably large proportion of that surplus has ended up being lent to the United States. In effect, the People's Republic China has become banker to the United States of America....
The Dutch Republic prevailed over the Habsburg Empire, because having the world's first modern stock market was financially preferable to having the world’s biggest silver mine. The problems of the French monarchy could not be resolved without a revolution because a convicted Scots murderer had wrecked the French financial system by unleashing the first stock market bubble and bust. It was Nathan Rothschild as much as the Duke of Wellington who defeated Napoleon at Waterloo. It was financial folly, a self-destructive cycle of defaults and devaluations, that turned Argentina from the world's sixth-richest country in the 1880s into the inflation-ridden basket case of the 1980s....
Financial history is essentially the result of institutional mutation and natural selection, as in the natural world, the evolutionary process has been subject to big disruptions in the form of geopolitical shocks and financial crises....
Those who put their faith in the 'wisdom of crowds' mean no more than that a large group of people is more likely to make a correct assessment than a small group of supposed experts. But that is not saying much. The old joke that 'Macroeconomists have successfully predicted nine of the last five recessions' is not so much a joke as a dispiriting truth about the difficulty of economic forecasting. Meanwhile, serious students of human psychology will expect as much madness as wisdom from large groups of people. A case in point must be the near-universal delusion among investors in the first half of 2007 that a major liquidity crisis could not occur." -- Niall Ferguson in"The Ascent of Money: A Financial History of the World"
Conversations with History - Niall Ferguson, UC Berkley, 11-3-08
"The markets are fine until they are not fine... For more than a year since our debate began, it's the Chinese who've been consistently agreeing with me, saying that they regard the course of U.S. fiscal and monetary policy as dangerous. So it’s not just me you are arguing with, Paul, actually, it’s the Chinese government." -- Niall Ferguson at the World Knowledge Forum in Seoul, Oct. 2010.
About Niall Ferguson
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