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Monday, March 2, 2009

There Will Be Blood: Niall Ferguson

[ HT Jesse's Cafe Americain: Economist Niall Ferguson on the Financial Crisis: "There Will Be Blood" ]

I've been warning of violence on a grand scale as the global economy continues to deteriorate.

In Hyperinflation First, Then Global War I first presented the theory that global economic instability will lead to the sudden unraveling of even advanced ethnic assimilation and that internal ethnic unrest is likely to rapidly escalate into full-scale external conflict between nation states. In Global Violence, Gold: But Not Yet I got more specific. Then in Global Protests, Riots, Violence as Economies Unravel I explained some of the more ominous signs in Western and Eastern Europe.

I based my expectations of global violence on the theories and writings of Niall Ferguson. On February 23rd, 2009 Niall Ferguson spoke up.

'There Will Be Blood':

"Harvard economic historian Niall Ferguson predicts prolonged financial hardship, even civil war, before the ‘Great Recession' ends

Harvard author and financial crisis guru Niall Ferguson has landed with a thud in Ottawa, spreading messages that could make even the most confident policy makers squirm.

The global crisis is far from over, has only just begun, and Canada is no exception, Mr. Ferguson said in an interview before delivering a presentation to public-policy think tank, Canada 2020.

Policy makers and forecasters who see a recovery next year are probably lying to boost public confidence, he said. And the crisis will eventually provoke political conflict, albeit not on the scale of a world war, but violent all the same."

The full article is definitely worth the read.

22 comments:

dougiefreshhh said...

Ben:

Reading between the lines... time for Goldfinger to pull the trigger?

Unless we have a global jubilee..where everyone forgives everyones debts...how in the world can we unwind all this?

Anonymous said...

So that Panarin guy's scenario, where the US breaks aparts in 2010 along ethnic lines may become true?

Anonymous said...

With two back to back armageddon articles, are you still short gold?

Anonymous said...

Niall Ferguson. Well,
".....they can do it at a lower cost than anybody else, because the U.S. retains the safe-haven status, which makes the world so unfair. Here is the world's biggest economy, which gave us subprime mortgages, rampant securitization, the collateralized debt obligation, Lehmann Brothers, Merrill Lynch. It is, in a sense, the fons et origo of this crisis. And yet, because it retains safe-haven status, in a global crisis, investors want to increase their exposure to the U.S. Hence, the dollar rally. Hence 10-year Treasuries down below 3 per cent yields. It's almost paradoxical that an American crisis ... reinforces the status of the United States as a safe haven."
He must know all about the activities of Summers and Rubin. Now Rob Kirby has a take on Ferguson which is interesting. Unfortunately I can't email you Kirby's article, your system won't let me send an attachment to you by email, so this is going to be clumsy.
I will paste a few comments from Kirby' article on Ferguson.

"Mr. Ferguson’s comment that investors wanted to increase their exposure to the U.S. is misleading. This was an outcome engineered by the U.S. monetary elites.

Monetary authorities induced highly levered hedge funds, who were long commodities, to liquidate their positions and delever. This forced hedge funds to raise cash U.S. Dollar balances to settle their trades. For example, the engineered collapse in the crude oil complex is chronicled in, "Oh Yes They Did!" (Another Kirby article)

Hedge fund investment in tangibles – in the face of unprecedented monetary debasement on the part of the U.S. Fed - reached such manic proportions by late 2008 that U.S. Dollar hegemony was threatened.

One should never mistakenly characterize a "forced and engineered" levered long liquidation as a "want" to accumulate a dying fiat currency.

To suggest that 10 yr. bond rates are below 3 % for this "safe haven" reason is misplaced and also false. Sub 3 % ten year interest rates are a product of J.P. Morgan’s Interest Rate Derivatives position – 59 Trillion in notional - of their 87 Trillion Overall Derivatives Book:"

The real reason 10yr govt yields are below 10% is the obsenity of 59T in interest swaps at JPM. These swaps in the absence of any end user demand, create artificial demand for bonds. Then there are over 5T in foreign exchange contracts at JPM (more false demand). What is JPM going to do when C and BAC succumb ? Niall Ferguson's low rates and desirable currency are toast.

we should all remember that our current financial crisis, that slew the likes of AIG, Lehman, Bear Stearns and soon Citi and BofA – these failures were all a direct result of blowups in their OTC derivatives exposure – derivatives exposures which pale in comparison to those held by J.P. Morgan Chase"
Josh

Tord Steiro said...

For all my disagreements with Niall Ferguson, I enjoy much of his work. Especially the counter-factual writings, I regard it as a stimulating and highly interesting intellectual game, and only through imagining the alternatives can we really try to figure out whether something is good or bad.

When it comes to global instability, however, I find myself closer to Ferguson than to many others. I am pretty certain that we will see violent tendencies - if not war - in many places where this was unthinkable just a few years back. The riots in Oslo in January is one such incident, and if not properly contained, Europe's calmest and most peaceful country may see a lot more violence in the time to come. And the US (and many other countries) is certainly in a much worse position than Scandiavia!

But we will see, perhaps Armageddon starts at Easter?

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