History Lesson from Niall Ferguson

A couple of months ago, Niall Ferguson was asked to speak at the Ninth Annual Niarchos Lecture. Niall Ferguson is a famous historian from Harvard. He has written many books like the following: The Cash Nexus, War of the World, and The Ascent of Money: A Financial History of the World. When he speaks people listen; here are some of the points of interest from his speech (most bullet points taken directly word-for-word from Niall himself):

• There is a suddenness to things when they go wrong in finance
• Canada is one country that is NOT involved with the extraordinary debt increase that most of the rest of the world is experiencing
• Crises of either war or internal politics (sometimes both), drove investors to sell bonds and therefore to drive up the yields on the bonds
• Exploding deficits to pay for the war and surging public debts caused an increase in risk in the eyes of investors
• It is striking the way in which very suddenly confidence can be lost in a country
• Ken Rogoff made the point that 90% debt-to-GDP is the threshold after which public debt tends to be associated with problems of low growth or high inflation, usually both (currently we are at 89% debt-to-GDP)
  
• Italy is much less vulnerable than Greece in the respect that most Italian debt, like most Japanese debt, is held by natives; it's not actually held by foreigners
• In the months ahead, look for debt default synonyms like repudiation, standstill, moratorium, restructuring, rescheduling, etc...Don't be fooled by the language, it still equates to debt default
  
• US treasuries are a safe haven the way Pearl Harbor was a safe haven in 1941; safe but not for much longer
• Favorite cartoon: Chinese sub threatens the US Navy. The Chinese submarine captain is says, "Turn around or we sell all our T-bills!"
• When you're spending more on your debt than on your army or your navy, it's all over as a great power
• It's not a thousand years that separates imperial zenith from imperial oblivion. It's really a very, very short ride from the top to the bottom