. March 15, 2011 SouthAmerica: Reply to thriftybob I checked the web for you, but CNN took out from their website the part of the interview with Niall Ferguson, but I found the transcript of that show as follow: âRestoring The American Dreamâ with Fareed Zakaria â GPS on CNN New powers are rising, and if America wants to maintain its economic competitive edge, it needs to make major changes â fast. But does America have the political will to act? Are Americans willing to sacrifice short-term consumption for long-term investment? On Sunday night, Fareed Zakaria GPS aired a one-hour special on âRestoring the American Dream,â with scholars Niall Ferguson, Jeffrey Sachs, Dambisa Moyo and Joseph Nye. *** Transcript: CNN LIVE EVENT/SPECIAL Fareed Zakaria: Restoring the American Dream Aired March 6, 2011 - 20:00 ET http://transcripts.cnn.com/TRANSCRIPTS/1103/06/se.02.html ZAKARIA: They are Hans Rosling, who will explain why we seem less exceptional these days. Harvard professors Niall Ferguson -- NIALL FERGUSON, HARVARD UNIVERSITY: Well, in some ways America stands on a cliff. Because great paths don't gently decline. FERGUSON: My guess is that this moment when China overtakes the United States will happen this decade, in the next 10 years. ZAKARIA: As Professor Rosling just showed us, it is not that the United States is falling. It's that others are rising. In my book "The post American World," I call it the rise of the rest. But what does it mean for the long-term fortunes of the United States? After all, there have been other leading powers that face new competition, and these stories all end in decline. Harvard's economic historian Niall Ferguson. ZAKARIA: When you look at America in a world in which China is rising, India is rising, what's your sense of where America stands in this new economic order? FERGUSON: Well, in some ways America stands on a cliff because great paths don't gently decline. They don't sort of fade away over decades. History shows that they very often collapse quite suddenly. They lose power quite dramatically. That was the experience most recently of the Soviet Union. When one looks at the fiscal position of the United States with the vast explosion of debt before but particularly after the financial crisis, it's clear that there's a major risk there. Goldman Sachs has predicted that China's economy will equal the U.S. in size sometime in the 2020s. That's probably right if you're $1.3 billion growing at 10 percent a year, that's bound to happen. ZAKARIA: Ferguson says those estimates were done before the financial crisis. But the reality is now even worse. FERGUSON: Everything that has happened since then leads me to expect that it will be even sooner than that because the financial crisis really slowed the United States down and China, although it slowed somewhat, scarcely missed a beat and continued to grow strongly at rates of close to 10 percent. So my guess is that this moment when China overtakes the United States will happen this decade, in the next 10 years. ZAKARIA: Harvard's Niall Ferguson says military spending does have something to do with it, but of course he brings it right back to the debt. FERGUSON: There's a kind of magic moment in the history of all empires when suddenly they find themselves spending more on paying the interest on the debt than they pay on national security. They pay more on the treasury securities than on the national security, if you like. This was true for Spain in the 17th century. It happened to France in the 18th century. It happens to the Ottoman Empire in the 19th century, and happened of course to the British Empire in the 20th. And it's happening to the United States now. And I would say at the risk of overreaching a little bit, there is a law of history here that once a great power or empire or -- call it yourself what you like -- once you are spending more on servicing that debt than you're spending on your army, and your Navy and your air force, it's probably the end of the line. ZAKARIA: Will the United States meet the same fate as the British Empire? We'll find out when we come back. ZAKARIA: Let's talk about Britain because we tend to think ourselves as exceptional, having a real entrepreneurial culture, having this extraordinarily advanced economy. But of course Britain thought all that about itself. It saw itself as the inventor of the industrial revolution, the workshop of the world, the place where all these fascinating new scientific discoveries, inventions were being created but it didn't stop it from declining. FERGUSON: The British of course had their own story of exceptionalism. It must be said that most countries do. And the British had the good reason to believe that they were exceptional because they really had invented the industrial revolution. So there was a sense, if you went to London in the 1850s of tremendous superiority. Of course the British were the best in everything. Not only were they the best at industry, they were also the best at agriculture, they were also the best at sailing, they were the best at sport, they were the best at entertainment, they were the best of course at empire because they're the world's biggest empire. And yet as early as the late 19th century people began to feel that it was slipping away. Germany and the United States both overtook Britain in the late 19th century in terms of economic size. And from then on really in the 20th century British history felt like the history of decline and fall. Now one reason for that was that Britain had to fight two world wars against one of those rivals -- Germany. And that was an extremely expensive business that event already more or less bankrupted Britain. So one has to remember that decline can be accelerated by major strategic miscalculations or confrontations with rivals. And I think there's an important lesson for the United States there. It's not just about economic decline, it's not just that sense of the Chinese catching up and maybe overtaking the United States really soon. There's also a strategic question. Do you end up on a collision course the way the British did with the Germans? FERGUSON: I think if you ask the question, what is it that Americans do best, the answer is, it's still the best country in the world to have a really good idea and turn it into a really profitable business. I still think the United States wins in that particular contest. ZAKARIA: I think Niall's right. ZAKARIA: Many Americans believe we've heard all this talk of decline before. Japan was going to overtake the United States and it never happened. But if you step back and look at the trends we're talking about historically, you will understand that the rest of the world has been playing catch-up with the west and with America for the last 100 years. Japan just began the trend but over the last decade dozens of countries have started playing our game and playing to win. FERGUSON: If you take a 500-year time frame, the story of world history is quite simple. For 500 years the west -- it wasn't just the United States, it started in Western Europe. The west patented six- killer applications that set it apart from the rest and left of the rest essentially stagnating for half a millennium. And those six-killer applications were in fact open sores. They were available to be downloaded by any non-western society that wanted to. The first to do it was Japan. Beginning in the late 19th century. And so what we're seeing actually is the fulfillment of a roughly century-long process whereby one Asian country after another has downloaded the killer applications of competition, of modern science, of the rule of law and private property rights, of modern medicine, of the consumer society, and the work ethic. Those six things together are secrets source of western civilization. ZAKARIA: So countries around the world copied the west's secret source of success. That's great for global growth but what lessons account United States learn? How can it flourish in a world where trade and technology are accelerating every day and there are new competitors everywhere? Jeffrey Sachs points to a set of countries that have been surprisingly competitive while this new world has been emerging. ZAKARIA: Most Americans would be surprised to learn that most northern European countries on a per capita GDP basis have grown as fast or faster than the United States over the last 25 years. SACHS: If you're lucky enough to have the chance to see what life is like in Stockholm, Sweden, or in Oslo, Norway, or Copenhagen, Denmark, and you're lucky to see it with your own eyes, you see really remarkable flourishing society with essentially a very broad middle class that has seen a dramatic rise of quality of life and on every indicator that we would want to look at, how long people are living, life expectancy, the health of the population, the education levels of the population, the leisure time that people have, the ability to watch for the children, the quality of education. These are flourishing societies. I enormously admire these places and I think they found the right balance of society. Work, of leisure, of being able to support the family at the same time to be able to compete internationally. I have a high technology economy. But at the same time, not leave people behind. It's a wonderful balance and I only wish that more parts of the world could find that balance, including in the United States. .
Thanks. I think time is very, very short for the dollar, too. With each crisis there has been a panic INTO the dollar as everyone bailed out of stocks, bonds,etc. But after each crisis the dollar seems to fall further because fewer and fewer people are trusting it as a long term store of value. And why should they?
Yep, many of the participants on this board treat inflation like housewives treat spiders. "There's nothing good about it." Nothing could be further from the truth. It is widely accepted that inflation would ideally match the combined growth rate of both the population and economic growth. If this were possible it would have the effect of an actual inflation rate of 0% for the population as a whole. If inflation were to remain at 0% in nominal terms and the population grew at 1.5%, each year would result in fewer dollars in the hands of each person. Prices must then drop to compensate for a shift in the supply/demand curves. This is known as deflationary spiral. Also, regardless of whether loans/notes of any kind claim to be fixed rate, everything is actually variable after accounting for inflation. Inflation encourages investment and drives growth as those wishing to keep their savings under the mattress will be realizing a negative return. Negative inflation (deflation) encourages people to simply stash cash under the mattress as that $ becomes more valuable in time. In extreme cases, purchases are delayed until a future time when prices will be lower, or purchasing power will be higher. Nobody would even consider purchasing a home as the value of that home would actually decrease each year even if paid for with cash. Even worse for the mortgage holder, who would effectively pay a higher interest rate each year for an "asset" that was decreasing in value. In the present situation, the root cause of our problems is the real estate bubble. I'm not claiming that it isn't warranted. Obviously prices were too high and must correct. But inflation effectively offsets inevitable price declines. Thus reducing the number of foreclosures and short sales. This benefits both the creditors and the debtors. Also note that while the debt levels are a bit scary here, none of the measures of money supply indicate cause for alarm. Quite the opposite actually over the last couple years. It is surprising that usually the avid inflation critics usually cite the M3 stats to prove that inflation is out of control. Now it has been dropping quickly since early '08 and they have all but abandoned it now that it doesn't support their claims. Don't worry though, it is rising again so it will soon be back in their playbook.
M3 is not published anymore. They stopped pubslihing it back in 2007 for a reason So I don't know which M3 statistics you are talking about.
My above post somewhat explains my position. It might make you sound a bit more intelligent if you back up your "stupid" claims with an intellectual argument. I'm not so arrogant as to suppose that I can't be wrong. But given that I've spent the last decade studying these topics, you'll need to present a pretty good case. Let's hear it.
M3 is still calculated independently from a few sources. You just don't hear about it much because it no longer supports the argument of those claiming conspiracy when it was discontinued.
I think its pretty obvious that all paper money eventually turns into a fraud, even if it wasn't the original intent.
Well, I think you could argue that initially, when they went from gold and silver to paper, it was not with the intent to defraud the people, but, as with all other paper currencies over time, the lure of being able to buy more things without having to actually earn them takes over, and the printing presses produce more debt, without a corresponding rise in the output of goods. Eventually people must toil/suffer to either repay it all, or someone must suffer with being repaid in currency with less purchasing power, or someone must suffer with not being repaid at all. It always ends that way. Given the printing press, or in this case, also a digital" printing press, they just can't resist printing.