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Fabulous FT editorial by Niall Ferguson - must read!


Eric50
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Fabulous FT editorial on the coming funding crisis. Favorite quotes: "there is no such thing as a Keynesian free lunch." and "it is appropriate that the fiscal crisis of the west has begun in Greece, the birthplace of western civilization. [] the key question is when that crisis will reach the last bastion of western power, on the other side of the Atlantic."

 

http://www.ft.com/cms/s/0/f90bca10-1679-11df-bf44-00144feab49a.html?nclick_check=1

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Okay it is a good article, and I might add it is blindingly obvious. I have been think about it a lot, since perusing Rogoff's book.  But what I have been able to figure out is what course does one take as an investor and a business person.  (Other than write a doom and gloom book--How you can profit from the next financial disaster)

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Fabulous FT editorial on the coming funding crisis. Favorite quotes: "there is no such thing as a Keynesian free lunch." and "it is appropriate that the fiscal crisis of the west has begun in Greece, the birthplace of western civilization. [] the key question is when that crisis will reach the last bastion of western power, on the other side of the Atlantic."

 

Since becoming a regular "expert" on the media circus, Ferguson has gone from being an impartial academic to an alarmist in order to stand out amongst the crowd selling soap by getting your attention.

The Greek debt crisis is neither the first, last or most serious of all the sh*t sandwiches out there waiting to be consumed. The tone is self serving.. as if the US financial system will be brought down by external rather than internal forces.

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That article was actually crap.  It never fails to amaze me how many people will warn of a funding crisis, when all the evidence you need is that there's currently an excess of money that would rather be in government bonds than invested.  Krugman posted a chart some time ago showing how federal government essentially stepped up and borrowed the difference between savings and private investment.  When people have the courage to move away from government bonds to making actual investments, yields will rise. . . but so will business activity, taxes, etc.

 

If you're not going to read the economic literature, at least take some time to get comfortable with what should be the cognitive dissonance from this idea.  When I see people like Niall Ferguson, i wish i had a program that let me check off and do away with ever having to see an article from him again.  His reputation to me is shot (its actually been made worthless to me several times before), and I never want to support any of his words by one of my clicks. . .

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That article was actually crap.  It never fails to amaze me how many people will warn of a funding crisis, when all the evidence you need is that there's currently an excess of money that would rather be in government bonds than invested.  Krugman posted a chart some time ago showing how federal government essentially stepped up and borrowed the difference between savings and private investment.  When people have the courage to move away from government bonds to making actual investments, yields will rise. . . but so will business activity, taxes, etc.

 

If you're not going to read the economic literature, at least take some time to get comfortable with what should be the cognitive dissonance from this idea.  When I see people like Niall Ferguson, i wish i had a program that let me check off and do away with ever having to see an article from him again.  His reputation to me is shot (its actually been made worthless to me several times before), and I never want to support any of his words by one of my clicks. . .

 

 

I agree. I think he's great too. You aren't going to get deeply nuanced, careful analysis from his books, but you will get an expansive overview from an author with a strong Hobbesian perspective. I wasn't a huge fan of books such as the Cash Nexus, where he ignores major countervailing arguments/examples, but his latest, The Ascent of Money, is pretty good and covers a lot interesting ground.

 

 

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That article was actually crap.  It never fails to amaze me how many people will warn of a funding crisis, when all the evidence you need is that there's currently an excess of money that would rather be in government bonds than invested.  Krugman posted a chart some time ago showing how federal government essentially stepped up and borrowed the difference between savings and private investment.  When people have the courage to move away from government bonds to making actual investments, yields will rise. . . but so will business activity, taxes, etc.

 

If you're not going to read the economic literature, at least take some time to get comfortable with what should be the cognitive dissonance from this idea.

 

 

Indeed, a little intellectual humility might be in order here.  I am not an economist, but you know AIG was a AAA credit once...

 

Are you saying that there is zero probability of the US having problems funding its public debt in the next five years?  Zero? Zero that interest rates are going to ratchet up to make the debt attractive.  Zero that the dollar will not fall relative to say gold?  

 

Re: Krugman's point, where we are now isn't the issue.  You have to think about what may and what is likely to happen.  In the words of Gretzky, skate to where the puck is going.  The last paragraph of Simon Johnson's article, The Greek Tragedy in today's (2/13) Wall Street Journal warns of the issue.

 

Speaking of reading the literature, I would suggest that you read Rogoff's book on financial crises.  He knows way more that the both of us.

 

Best,

 

Netnet

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