Countering Krugman’s argument that today’s low interest rates show that no one is worried about lending money to us and, therefore, that we should borrow and spend our way to prosperity, Ferguson argues that today’s interest rates are irrelevant. When countries get into trouble, he says, they get into trouble quickly – the way Greece and other European countries have. Taking on huge new debts now with the assumption that interest rates will remain low forever, is like playing “Russian Roulette.” The time to get our fiscal house in order is now, before the crisis, not once interest rates begin to climb and it’s too late. Words: 439
So conveys Henry Blodget (http://finance.yahoo.com/blogs/) of Niall Ferguson’s view about how the U.S. should deal with its lousy economy and debt-and-deficit problem. Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has edited Blodget’s original article* below for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.
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Blodget goes on to say:
On the one hand are the “austerians,” who think the U.S. should immediately cut government spending to balance its budget, “taking our medicine” in one painful dose. On the other hand are the Keynesians, like Paul Krugman, who think the U.S. should launch more government stimulus, increasing the debt in the near-term, but helping the economy to grow out of the problem. One of Krugman’s nemeses over the past few years has been Harvard professor Niall Ferguson, the author of a new book called CIVILIZATION: The West And The Rest who has been screaming from the rooftops about the risks of piling up too big a debt-mountain, and he’s not backing down now.
Importantly, Ferguson says he is not in favor of radically chopping government spending in the next year or two, clobbering the economy in the process. Rather, he says, the government should develop and implement a sound 10-year plan, one that phases in the cuts and eventually gets on solid footing. If we don’t, Ferguson says, we’ll eventually pass the point of no return and then we’ll be forced to do what Greece has done – make such drastic cuts that we get into a “death spiral” in which the each new cut shrinks the economy and increases the deficit and the debt–the very problems that such cuts are supposed to address.
I have a great deal of respect for Paul Krugman as an economist. He has a unique talent among economists for being able to make complex economic issues both understandable and interesting for the average person. [That being said,]…I am far less impressed with his abilities as a public policy commentator. [Let me explain.] Words: 567
Wars and depressions largely characterize the periods of time where there have been significant run-ups in the level of the U.S. National Debt Burden per Capita [i.e. the U.S. National Debt Burden per Capita-to-income Index], with the debt taken on to support the costs of the U.S. Civil War and World War II being the most significant. Today… it is perhaps most comparable to the Great Depression. [Take a look.] Words: 326
The global financial system is highly interconnected so problems in one part of the world can reverberate almost everywhere else – risking a default, contagion, contracting credit and collapsing economic activity… [Take a look at the amazing graphic in this article to get] a visual guide of the intertwined complexities of the crisis.
The clock is ticking. Every second, it seems, someone in the world takes on more debt. The idea of a debt clock for an individual nation… [is old hat – see links below to many such debt clocks – but] our clock (here) shows the global figure for all (or almost all) government debts in dollar terms. Words: 300
By now nobody should have any doubts as to just how disturbing America’s fiscal debacle is. For those naive and innocent few who still think there is a Hollywood ending with a pot of gold awaiting everyone at the end of the rainbow, we present the following “10 essential fiscal charts” from the Pew Policy Institute.
The kind of impact [our economy is] going to have will not be like flying into the side of a mountain. It will be the kind of crash that skids over land, clipping trees and buildings until the plane ends up wingless in a smoldering heap. I just hope the fuel tanks don’t ignite when the long rough ride is over. [Let me explain.] Words: 832
It really is hard to find the words to describe the true horror of the national debt of the U.S. The U.S. government has been on the greatest debt binge in all of human history, and a day of reckoning is coming that is going to be so painful that it is going to shock America to the core. We have lived so far above our means for so long that none of us really has any concept of what “normal” is like anymore. The United States has enjoyed the greatest party in the history of the world, but now this decades-old party is ending and the bills are coming due. Our current system is headed for an inevitable collapse. There is no way of getting around it – a horrific economic collapse is coming [and] it is going to change the world. You better get ready. [Let me explain further.] Words: 1771
The new [debt ceiling deal] legislation will add $2.4 trillion to the $14.3 trillion national debt in a little over a year – and we don’t even start saving money until after the debt reaches $16.7 trillion! This bill doesn’t even cut the deficit. It just slows the growth of government spending to around 8% a year! So, even if Congress cuts $2.1 trillion out of the budget over the next 10 years, we will still be running annual deficits of more than $1 trillion…[That means that in addition to a deficit that will continue to grow we can look forward to a shrinking economy, an imploding U.S. dollar and exploding inflation. Some future! Let me explain.] Words: 827
A highly talented individual in the USA finds it ever more difficult to fight his way through to self-realization and a socially creative position. Universities, politics, and businesses ever more frequently demonstrate a united front of relatively untalented persons and even incompetent persons. The word ‘overeducated’ is heard more and more often. Such ‘overqualified’ individuals finally hide out in some foundation laboratory where they are allowed to earn the Nobel prize as long as they don’t do anything really useful. Words:
The U.S. is headed inexorably toward a systemic failure, a complete and utter collapse of the financial system. TARP and all the other machinations have not improved the underlying insolvency of the banking system. They have, however, deferred a collapse and ensured that it will ultimately be worse. [Let me explain.] Words: 1385
It all comes down to this: We have to match growth to debt. If we can’t create miracles from growth, we have to consider inflation to reduce the value of our debt. [Those are the] only two ways out of our current global economic mess – innovation and inflation. As the saying goes, we should hope for the best (more innovation) and prepare for the worst (higher inflation). [Let me explain why that is the case.] Words: 1195