Friday, May 28, 2010

Niall Ferguson on Fiscal Crises and Imperial Collapse

Niall Ferguson recently spoke on "Fiscal Crises and Imperial Collapses" at the Peterson Institute for International Economics.

The event summary, presentation transcript and slides, as well as audio and video of the talk and Q&A session, are all available at the PIIE link above.

I happened to watch Niall's historical overview of government debt crises last night, and it certainly put the current problems we are facing with sovereign debt into perspective. On a day when we are greeted with news of Spain losing its AAA rating through a Fitch downgrade, Niall's speech certainly comes at a pressing moment and the lessons he imparts are profound.

Listen closely to Ferguson's conclusion on the historical impact of the bond vigilantes in each public debt crisis. Each time, he points out, interest rates on government debt skyrocketed when bond holders saw an unsustainable fiscal program threaten the viability of a nation's debt repayment and market participants delivered their verdict by driving up interest rates on public debt.

The current crisis period is no different, despite the ravings of politicians who go on about evil speculators "attacking" their poor country's debt. As Ferguson shows, there is a time honored manner "in which financial markets voted on the credibility of a government’s fiscal policy", and the striking feature of public debt crises is the sudden loss of confidence that might befall any nation's public debt.

Enjoy the video and the insights offered in Ferguson's timely historical analysis.