Sunday, March 13, 2005

I'm not a huge fan of Niall Ferguson, the British financial historian who prompted a bidding war last year between Harvard and NYU. His earlier books on the Rothschilds were fantastic, but I've gotten the sense of late -- especially after sifting through his most recent work, Colossus: The Price of America's Emire -- that he's simply overstretched. No matter how brilliant you are, compelling research and analysis still takes time.

However, Ferguson's article in today's NYT Magazine truly is impressive. He might be a bit more optimistic than myself, but he manages to cut through a lot of the confusion about what running a "double deficit" means with remarkable clarity.

His take: 1) China will continue to prop up the dollar, because if the dollar slid against the renminbi, it would be far worse for them than us; and 2) the best historical corrolary to present U.S. debt levels are those endured by post-war Britain.

Where I depart from Ferguson is in thinking that the second of his points should make his first more worrisome. Whether it happens five or fifteen or fifty years from now, there will come a time when China is no longer dependent on the US as their main consumer. And unlike Britain, which had to incur debt to finance WWII, we can actually avoid this debt if we choose to.

That we have so far chosen not to -- that we have, in the words of a former Treasury Secretary, continued to say to the world, "the dollar is our currency, but your problem" -- disturbs me to no end. It's one thing to be forced into irresponsible fiscal policies, but it's quite another to consciously opt for them.


Post a Comment

<< Home