Niall Ferguson How bad the crisis could get - CNN 19Jan09

Harvard historian Niall Ferguson in an interview about the severity of the global economic Crises.
Will China save the United States or will they decide to concentrate on themselves?
Protectionism could lead to a global meltdown.

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[roknrow]

IQuestions for Niall: 1. What are the systems dynamics that cause currency valuation to increase or decrease?

2. Is currency to complex to be valued in a way similar to value stocks (ie. NPV of future earnings growth)?

3. When will the trend change whereby ever since 1982, stocks have been going up interest rates have been going down?

[ewrh78]

well - i make a try:

1. e.g. "IS-LM-B"P - is the name of an economic concept explaining the equilibrium of an open economy - (ivestments=savings - Money demand/supply - Balance of payments) - very complicated concept i wasn't able to grasp fully

2. Yes - extremely far more complex (besides that - NPV=not used, DCF & EVA =garbage/tea leave reading)

3. already has changed - bubble has burst (intrest will rise soon enough to try preventing hyper inflation)

[gadionson1]

TALKED ABOUT CRISIS, SHOULD HAVE ABOUT SOLUTIONS TOO...

[NearAbbeyRoad]

Ferguson is a historian - should look into the history of raising taxes. Land Valuation Tax was in the Middle Ages when all was stable. The landed gentry gradually pushed taxation of land onto people with income tax making themselves super rich. Two points made the economy unstable:

1. Since taxation of land was moved onto people's labours

2. Economists 100 yrs ago, for vested interests, changed classic economics by moving LAND into CAPITAL. LAND is unique and treated likes a car (CAPITAL)

[NearAbbeyRoad]

The root cause for the 1929 and 2008 crashes was LAND. Debt after debt was poured into land because the increased values are tax free. The land dwarfed the rest of the economy collapsing taking all with it. Surplus earnings get poured into land in a boom - economists will tell you that

The solution Niall Ferguson? Introduce Land Valuation Tax. It stops over speculation in LAND. It can eliminate income tax & pay for needed public infrastructure. Look at Harrisburg, Singapore and Hong Kong

[12022304687]

Its great that the interviewer is also very well-informed; resulting in a very interesting  discussion.

[poodtang1]

America's problems began when it evolved from a producing society to a consumer society.

[Phead128]

With a population that is humongous, 5 times the size of US population, I'm pretty sure if China is able to eek 1/10 a consumer case out of her mighty population, she can absorb a lot of loss of exports to US.

[existentialvoid]

@09geauxtigers but thats not what is happenening - China instead has a major crisis in rising cost of labor which is snuffing out a nascent middle class and instead creating the super-rich and super-poor. ma massive 2 tiered society.

Remember, China is 4.7 trillion to uS at 16 trillion - China may have a lot of exports, but thats all its got.

[existentialvoid]

@lanser87 thats how it works - china needs the us market to sell all the stuff they make, and we need chinese money to kep buying their stuff. They can't pull out because it will mean the total collapse of their economy, and the us can't stop because its addicted to debt.

Chi-merica indeed.

[lanser87]

Ok so China saves us from debt by using their money which in turn becomes our money, then we give the money back to china by buying their products? WTF?

[ItsFazsha]

18 months after this interview, let's take a look: 1. Despite a $1T stimulus, close to 10% unemployment; 2. UK, Greece, Spain, and the EU community on the ropes; 3. Brazil unemployment has dropped to 7.3% with 5.26% inflation rate, 4. China property inflation hits 12.2%, consumer price inflation hits 2.8%. We have exported inflation to countries that export to us. Gold has gone from $850 to $1210.