Niall Ferguson: "There Will Be Blood"

Some dire and direct comments from historian Niall Ferguson on the current depression/recession. Here he is on why the rest of the world will suffer more than the U.S. (Note that the comments were given while speaking in Canada, hence the focus on that country.)

Heather Scoffield: Canadian leaders frequently argue that Canada is in better financial shape than elsewhere in the world, and therefore should fare better during this crisis. Do you agree?

Niall Ferguson: Canada is [considered] a winner because its banks are less leveraged, bank regulation here has been tighter, because its housing market hasn’t been in a bubble quite the same way. It’s tempting to conclude from that … that Canada will be less hard hit in the crisis than the United States. But that is unfortunately wrong. Because this is a very unfair crisis. 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.”

And on why "there will be blood":

Heather Scoffield: Is a violent resolution to this crisis inevitable?

Niall Ferguson: “There will be blood, in the sense that a crisis of this magnitude is bound to increase political as well as economic [conflict]. It is bound to destabilize some countries. It will cause civil wars to break out, that have been dormant. It will topple governments that were moderate and bring in governments that are extreme. These things are pretty predictable. The question is whether the general destabilization, the return of, if you like, political risk, ultimately leads to something really big in the realm of geopolitics. That seems a less certain outcome…

…It’s just that I don’t see it producing anything comparable with 1914 or 1939. It’s kind of hard to envisage a world war. Even when most pessimistic, I struggle to see how that would work, because the U.S., for all its difficulties in the financial world, is so overwhelmingly dominant in the military world.”

Lots more here. Recommended.

Related posts:

  1. Niall Ferguson in Barron’s
  2. Niall Ferguson on The Great Repression
  3. Time: Niall Ferguson on the Path Forward
  4. Niall Ferguson on Planet Finance and the Age of Leverage
  5. Robert Skidelsky on Niall Ferguson