The Bestest and the Brightest : Niall Ferguson

This post by Dr. Krugman reminds me of an interview I read in February. In it, Dr. Niall Ferguson displays a penchant for rambling, drama, and self-contradiction, and the inability to approach things from a consistent world view. It's hard to be entirely consistent in an interview setting. But still, one expects more from a Harvard prof, after all.

Regarding the financial crisis, and declining world trade.

Quote 1:

The epicentre is the United States, but the rest of the world, and particularly America's trading partners, will get hit harder than the U.S.”

“It suggests virtue is its own reward. You don't get any reward beyond the self-satisfaction of having been virtuous. This is a crisis of globalization. Therefore, the more an economy depends on the global system, the harder it hurts. Canada is not finding the worst. Asian economies are going to be really slammed this year. But it's an unfair world. The U.S. won't be as badly affected as most countries.”

Quote 2:

This is going to be the beginning of a whole new investment strategy in which companies that can't roll their debt over end up being sold at bargain basement prices, or broken up and their assets sold at bargain-basement prices, in very, very large numbers. And it doesn't take a lot of imagination to see that the buyers will be sovereign wealth funds or other entities in surplus countries. The world divides in two, the debtors and the creditors. The debtors … (U.S., Europe) ... are going to have to sell of their assets. Call it the global foreclosure. They're going to be selling their assets cheaply to those who have the surpluses. This is not going to be like the Chinese buying Blackstone at the top of the market.

“It's revenge of the sovereign wealth funds. They got burned. And this time, no more Mr. Nice Guy.”

He can't decide who is going to 'win' - the debtors, or the creditors. His arguments tend to be confusing because he is conflicted on that central question, without acknowledging it. In the 1st Quote, the chief debtor nation, the United States, is hurt least. In the 2nd Quote, the chief creditors are hurt least, and actually buy up the distressed assets from the debtor nations !

He further muddies things by arguing that China, the chief creditor, is dependent on Chimera (and through that, the chief debtor, the U.S.).

“They have nowhere else to go. They have no other strategy that they can adopt in time to cushion the blow. Their exports are contracting at a terrifying speed. They want at all costs to avoid any kind of big shift in policy. They want to keep, as far as possible, the U.S. importing Chinese goods. They want to keep currencies stable.