Niall Ferguson: Empires on the Edge of Chaos

Brilliant lecture.

01. Introduction
02. Niall Ferguson Opening Remarks
03. Historical Cycles of Empire Decline
04. Complexity Theory
05. Implications for the United States
06. Interest Payments as a Share of US Revenue
07. Failure of Perception
08. Debt Payment Overtaking Defense Spending
09. Q1: Healthcare Reform
10. Q2: China’s Military Sustainability
11. Q3: Gold Investing

just own 10% in your portfolio, because the time to buy was 1999 when Gordon Brown showed his business acumen and sold the Bank of England’s gold for 300 and something dollars an ounce.  But I don’t see gold going much higher in these deflationary times.

12. Q4: Political Stability of China

nationalism has become a cement that holds China together. it is more stable that we think.

13. Q5: Children Teaching You About Debt / Radical Islam

debt and radical islam is somewhat two sides of the same coin.  if the US fails to address the threat of debt then it will not be able to respond to the threat of radical islam.

14. Q6: Advice to Obama

  1. get Paul Volker to go on prime time tv in the next week and explain how your administration is going to get the federal deficit down to 0% in the next 10 yrs.  medicare, social security reforms.  simplify tax code.  cuts in corporation taxes and a federal sales tax.  get Volker, someone with authority.
  2. he needs a grand plan.  his foreign policy is making speeches about how he is nicer than your predecessor.  this is not a strategy. it is more like a facebook entry. i have not been asked by the president, but i live in hope.

15. Q7: Limits of Keynesian Stimulus

if the United States has a fiscal policy that it will run a deficit every year until 2080, which is its current policy, that is not Keynesianism, that is a fiscal crisis. that is not a policy that John Maynard Keynes would have approved. he said, he was much less Keynesian than the American Keynesians.  that’s become ever more true as they have become ever more Keynesian.

Krugman is a clever man…but on questions of fiscal policy, he seems to me to be completely out of touch with reality.  that is not just my view, that is the view of Ken Rogoff, my Harvard colleague, who is a practitioner of the dismal science.

I am not an economist, I am a historian.  I don’t just look at the General Theory of 1936, I look at what happened when countries did try Keynesianism year after year after year. becaues we have run this experiment before, folks, and it’s called Japan. if you attempt to use deficit finance to achieve recovery through fiscal stimulus, it doesn’t necessarily work, but you do end up with a heck of a lot of debt. +200% of GDP in the Japanese case.

remember in the post-war period, Richard Nixon when he said “we are all Keynesians now”? we got stagflation. 0% growth and double digit inflation.

it’s a little bit strange suddenly in the midst of this crisis to think that Keynes can save us and to forget all the advances that the dismal science made in the period after Keynes. they seem to have vanished from Paul Krugman’s mind I think that’s what comes of writing a column in the New York Times. it’s a very dangerous thing for a serious academic to do.

16. Q8: Better Leadership in the West

churchill said democracy is the worst form of government other than all the others that have been tried.  in crisis, great leaders will rise up like churchill.

[i cannot agree with that.]

17. Q9: Fear of Hyperinflation

Keynes made up the quote and attributed it to Lenin.  it was not Lenin, it was another Bolshevik, and he said roughly, that the best way of getting rid of the bourgeoisie was to destroy it the Russian currency and indeed the Bolsheviks did just that.

many people today are worried about hyperinflation or inflation is the endgame of all of this, that we will print our way out of these these huge debts. and there is considerable historical evidence to support this. that highly indebted countries do resort to inflation.  it’s true in the case of Argentine on more than one occasion it was true of course in Germany, after the first world  war, and I could go on.

but it is harder to generate inflation than it looks.

Bernanke famously said that if it came to this he would fly a helicopter over the US dropping dollar bills out the windows to stave off deflation. but if people’s expectations become deflation, they might just put it in savings accounts and not spend it.

one of the big risks we face today is not inflation – we should be so lucky. the risk we face today is the biggest economy in the world tips over into deflation.

the values of Bourgeois society don’t depend exclusively on the currency. there, as usual, the Bolsheviks were over simplifying things. I want to leave you with this thought: those

I want to leave you with this cold what we call Western civilization those of us who are too embarrassed to use the phrase consists of more than just money more than just the capitalist system, thought that’s clearly one of its foundations.

Western civilization consists of:

  • the scientific method. testing your hypothesis and trying to prove it wrong.
  • the rule of law.  subordinating all of the concerns, particularly the concerns of the powerful to the rule of law.  transparent law. law that holds above all else the individual’s freedom of private property rights.
  • the medicine that keeps us all much healthier.
  • a peculiar work ethic. one that combines a sense of the need to work for fulfilment with that kind of social obligation to those around us.

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