Niall Ferguson - The European Lehman Brothers

6 Sep 2011 Bloomberg
Niall Ferguson is a history professor at Harvard University and a Bloomberg Television contributing editor.

Presenter --
Is this 2008?

Niall Ferguson --
I am inclined to agree. I've warned now for some time on the possibility of a European Lehman Brothers. I'm surprised it didn't happen sooner. It's been an open secret really since 2008 that the European debt crisis was in fact a European banking crisis. Now we're seeing a re-run of what happened in the US in 2008/2009. It's just taking a bit longer in Europe.

Presenter --
We hear we are closer to a fiscal union / fiscal consolidation from Trichet and Mario Draghi. Could a taxing authority somehow officialise if you will the transfer of money from Germany to the rest of Europe to buoy all the economies that are at risk?

Niall Ferguson --
Erik, if we could wave a magic wand and turn the European Union into the United States of Europe that would certainly solve the problem [Incredible -- is it possible I wonder...] The trouble the Europeans have is that they created a monetary union without having a fiscal union, without being in effect a federal state. We said it wouldn't work. In the past you needed political unity so that the transfers are automatic and don't have to be agreed on an ad-hoc basis.

The Germans have lost all faith in further integration.

Presenter --
What happens next?


Niall Ferguson --
Without international co-ordination this thing gets worse. What we have now is an every man for himself situation epitomised by currency intervention by central banks [the currency war]. To stop it this from turning into something worse than a Lehman crisis you need a major international effort.

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[equsnarnd]

This clip is much older than Oct 26, 2011.

[equsnarnd]

What I find remarkable about Ferguson's comments here is that he talks about transferring wealth from those who have it to those that don't, from the productive to the non-productive, without blinking, as though there were some sort of natural law that allows for this. Indefinitely.  There isn't and it doesn't so those kinds of soulutions are temporary at best and leave all the structural problems that created this mess, in place, untouched.