If you have some time, you really need to watch the Niarchos lecture that Harvard economic historian Niall Ferguson just delivered, on the economic crisis. If really pressed for time, start watching at about the 29 minute point, through to the end. He points out why Greece’s catastrophe is quite likely not to be the first of its kind. He points out some startling statistics on debt that show the United States is in many significant respects no different from Greece. At the current rate, for example, by 2040 over 20 percent of the American GDP will go toward paying interest payments on the federal debt. Unthinkable! But it’s coming, absent a rather severe turning away from our spendthrift ways. Ferguson says excessive positive debt is “a consequence of political weakness … not the results of profound economic processes.” In other words, this is our fault. No one forced our democratic government to spend foolishly, and to put it all on the credit card. Ferguson said it’s highly unlikely that the US is going to grow out of its debt problem. (He also says that US treasuries are only a safe haven today in the same sense that Pearl Harbor was a safe haven for most of 1941). He says in history, there is only a single example of a government that got out of its heavy debt burden without inflation and/or default: Great Britain after 1815. The only realistic options we have today are 1) printing money, and 2) sovereign default. Ferguson believes that we are going to see many major economic powers defaulting. What’s more, he asks of the United States, “How long can the world’s biggest debtor go on being the world’s strongest power?” He displays a chart showing that at some point over the next six years, the US will for the first time pay more money in interest on its debt than it will pay for its own defense. Said Ferguson, “When you’re spending more on your debt than on your army and your navy, it’s all over for you as a great power.”

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