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Jacob Wolinsky
Jacob Wolinsky
Articles  | Author's Website |

Niall Ferguson Rips Paul Krugman's Policy Reccomendations

July 06, 2010 | About:
Niall Ferguson of Harvard University spoke with Bloomberg Television on the subject of bond markets and the threat of a speculative bond attack against the United States.

0:35 Bond vigilantes are similar to those who were shorting invest banks a few years ago. They will keep climbing the quality of countries, similar to how they did with banks.

1:35 There is no example in history of any country growing out of this sort of debt position, except for Britain in the early 1800s, which had empire and industrial revolution on its side.

2:10 What is worrying is that there is no inflation, which is the easy way out of this sort of financial situation. Default now seems the only escape, and the U.S. may choose that path with unfunded liabilities like Social Security.

3:00 Nothing would scare the market more than if the government followed Paul Krugman's call for more stimulus.

Read more: http://www.businessinsider.com/niall-ferguson-paul-krugman-2010-7#ixzz0svCJmGg4

About the author:

Jacob Wolinsky
My investment ideas have been inspired by many of value investors including Benjamin Graham, Charles Royce, John Neff, Joel Greenblatt, Peter Lynch, Seth Klarman,Martin Whitman and Bruce Greenwald. .I live with my wife and daughter in Monsey, NY. I can be contacted jacobwolinsky(AT)gmail.com and my blog is www.valuewalk.com

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Rating: 3.3/5 (30 votes)


Brianbook premium member - 7 years ago
I will stand on the shoulders of Buffett, Soros, Krugman, Keynes & FDR by supporting a second stimulus. Our government can now finance long overdue infrastructure projects at low rates & costs e.g. cheap labor, so why not? The labor of 10% of our workforce will be lost forever. As FDR reasoned in his State of the Union Address (1/11/44), a job with a living wage should be a right of every citizen in the U.S., guaranteed by our Constitution.

Paulwallba - 7 years ago    Report SPAM

I agree... I also find it amusing how so much media time is given to a guy who is a professor of History, not Economics, not Finance. If you're looking to get out of a recession, who would you listen to, a Nobel Prize winner in Economics or some random history teacher trying pump his book?
Yswolinsky - 7 years ago    Report SPAM
If you think having a Nobel prize qualifies you to know anything about economics just look at the ones who were at LTCM.
Iamnotamoron - 7 years ago    Report SPAM

"I will stand on the shoulders of Buffett, Soros, Krugman, Keynes & FDR"

More like kiss their asses.

How naive to think that additional stimulus including spending on unemployemnt benefits and perpetuating runaway spending by states and municipalities is the right thing to do.

My friends, it's time to take our medicine and own up to our problems.

First the fertilizer:

Cut spending

Cut entitlements

Cut taxes

Next the bloom

Allow the ingenuity of the American People and the capitalist system to flourish

Whiners like Krugman have their heads up their socialist asses.

I am not a moron

Brianbook premium member - 7 years ago
Why not comment like an adult in accordance with the rules of academic engagement (look it up) , & avoid the ad hominem. You may not agree with Krugman, but his opinions should be respected. As John Wesley preached, "Think, & let think."

Simon - 7 years ago    Report SPAM
Niall Ferguson does not understand fundamental financial math. He is against another stimulus, i.e. government deficit spending. BUT, he says inflation is one way to solve the debt prrblem. Alas, spending government money, i.e. stimulus, will lead exactly to his solution of the problem: inflation (which is what we need, albeit controlled and not excessive). Financial belt tightening that he and most of the clueless republicans recommend will lead to deflation and to the worthening of the debt problem, exactly as it happened during the great depression. At that time other Fregusson-like thinkers implemented tight monetary policy to control debt and fight inflation....Do we want that outcome again?? Ireland has followed his belt tightening presription which led so far to no positive result )Ireland still can not borrow on the international markets) just a lot of pain for the poeple. The man is regretfully clueless. Which would be OK, if he was alone...
Yswolinsky - 7 years ago    Report SPAM
There can still be inflation without more stimulus, I do not see the contradiction.

Djamelh - 7 years ago    Report SPAM
Simon - You might want to try reading up on some basic economics yourself before accusing a Professor in it that he doesn't know what he's talking about. The government can print money, lower taxes, pay off debts and in the process cause inflation, or more likely hyperinflation--all without the use of another stimulus package.

Ferguson is actually against governments in the west from borrowing any more money because they're on the brink of defaulting spectacularly.
RobJoseph - 7 years ago    Report SPAM
Why on earth should a job be the right of anyone? Where in the constitution does it give that right? Why should government be providing that kind of help to citizens. Government has power only when it takes it, economic or otherwise, from other people. To give someone a "right" you have to infringe on others' rights. This is the entire lesson of the American experiment.

"I will stand on the shoulders of Buffett, Soros, Krugman, Keynes & FDR by supporting a second stimulus. Our government can now finance long overdue infrastructure projects at low rates & costs e.g. cheap labor, so why not? The labor of 10% of our workforce will be lost forever. As FDR reasoned in his State of the Union Address (1/11/44), a job with a living wage should be a right of every citizen in the U.S., guaranteed by our Constitution."

Sivaram - 7 years ago    Report SPAM

I'm left-leaning but I don't necessarily agree with everything Krugman says. But I think Niall Ferguson is like some on the right who only have one hammer and see everything as a nice round nail. You know, kind of like how some on the right believe that tax cuts are the answer to every single economic problem in the world.

Ferguson has little credibility on this debt issue. Where was he 3 years ago? Or 5? or 10? Hardly any word about debt back then. Yes, the debt was lower but not by much (deficit is much higher now though.)

Although the market can always be wrong but I find it interesting that Ferguson takes a bet against the bond market. The bond market has been driving down Treasury yields and if there is a time to leverage up, now (and for the next decade, if my deflation view is correct) is the time. I don't know why Ferguson promotes a strategy of backing away from the bond market when yields are so low. If anything, the biggest losers are going to be the bond investors, not the government.

Having said all that, the whole world, including many developing countries, are going to see some debt crises over the next 50 years. This is pretty much a given. So countries need to work through their debt, but I think it's a bit risky to be doing that in the thick of a crisis. Also I think there is a huge difference between a debt crisis in some country like Greece and USA.
Brianbook premium member - 7 years ago
According to FDR (a convert to Keynesian economics after 4 terms as President), a "job with a living wage" should be the right of every citizen in this great country. "Equality in the pursuit of happiness" as guaranteed by our Constitution, must include a job with a living wage, for "necessitous men are not free men". "Freedom of want" is one of the "Four Freedoms" which are inevitable to a flourishing democracy. Finally, FDR said "the test of our progress... is whether we provide enough for those who have too little". FDR challenged this country toward greatness during the depression & WWII. Certainly a courageous leader, exhibiting "grace under pressure". A statesman, who transcended "politics without principle", one of Gandhi's 7 Deadly Social Sins.

Yswolinsky - 7 years ago    Report SPAM
FDR really cared for the common man like the Japanese he rounded up and place in internment camps, and the gas chambers he refused to bomb in Europe while American planes passed right over them.
Brianbook premium member - 7 years ago
FDR was a great president, not a saint.
Mo77 - 7 years ago    Report SPAM
I would recommend that everyone should read Niall Ferguson's book 'The Ascent of Money'. I'm not the brightest guy in the world and Mr. Ferguson writes in a very understanding and inciteful way. At the end of the day, the value of any currency is tied into a country's ability to meet's it debt obligations through the bonds. We have a huge debt, trillions in unfunded liabilities, a huge trade deficit and a population who scatheswith equal measure at any talk of raising taxes and any talk of cutting entitlements.

I doubt the US will every get to the point to where Argentina was in the early 90's, which he discussed in the book. I pray we don't.

If the U.S. were a corporation and taking a look at it's balance sheet (not knowing it the US govt and that it has a printing press and it is still the world's reserve currency), would you buy it's long-term bonds?

My feeling is that the reason US treasuries are still so low, is because we are as I've heard it said the U.S is the tallest midget in the room.

I think sometimes we make the mistake of sanctifying economists, particularly Nobel-prize winners. Economists are trying to explain how economies work and how economic agents interact. They cite stats, figures, indexes, etc. Recently I see Alan Greenspan and John Taylor are arguing with one another about Greenspan's decision to keep interest rates too low for too long. They spend time punching holes into each other's reasoning.

Economists kind of remind me of the old Talmudic scholars of Eastern Europe. Highly intelligent men, but they produce a whole lot of pilpul.

Yswolinsky - 7 years ago    Report SPAM
If only FDR showed an iota of concern over the babies getting sent to gas chambers in Auschwitz, he would have gone from a compassionate, great president to a saint.

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