I’ve been remiss in not linking to this sooner, but here is Niall Ferguson’s thought-provoking FT piece from a few days ago. It is an imaginary look back on the world of finance from the vantage point of year-end 2009.
In all kinds of ways, the Great Repression had â€œMade in Americaâ€ stamped all over it. Yet its effects were more severe in the rest of the world than in the US. And, as a consequence, the US managed to retain its â€œsafe havenâ€ status. The worse things got in Europe, in Japan and in emerging markets, the more readily investors bought Treasuries and held dollars.
For the rest of the world, 2009 proved to be an annus horribilis. Japan was plunged back into the deflationary nightmare of the 1990s by yen appreciation and a collapse of consumer confidence. Things were little better in Europe. There had been much anti-American finger-pointing by European leaders in 2008. The French president Nicolas Sarkozy had talked at the G-20 summit in Washington as if he alone could save the world economy. The British prime minister Gordon Brown had sought to give a similar impression, claiming authorship of the policy of bank recapitalisation. The German chancellor Angela Merkel, meanwhile, voiced stern disapproval of the excessively large American deficit.