Niall Ferguson on interest on debt payments and defense spending.
Debt Has Always Been the Ruin of Great Powers. Is the U.S. Next?
From Habsburg Spain to Trump’s America, there’s no escaping the consequences of spending more on interest payments than on defense.
History suggests that any sustained period when a great power spends more on interest payments than on military capabilities is likely to see its strategic rivals challenge its position. The tension between “guns and coupons” (as the interest-bearing parts of bonds used to be known) may also undermine its domestic stability, as governments try and fail to meet the competing demands of generals, bondholders, taxpayers and welfare recipients.
In the absence of radical reform of America’s principal entitlement programs—which successive administrations this century have either failed to achieve or ruled out—the only plausible way that the U.S. can come back within the limit of Ferguson’s Law is therefore through a productivity miracle.
Not a bad piece by Niall Ferguson… one criticism I have is he sounded too much like Paul Kennedy in 1987
Thanks for the route round the WSJ paywall. It is Niall Ferguson, who has spent his entire life climbing the greasy pole … so we have to be cautious.
Like so many financial types, he is focused on numbers, even if those numbers (like GDP) are deeply flawed. He clearly is not focused on the Real Economy where goods are manufactured and real services provided. He does not even mention the unsustainable US Trade Deficit, which is closely related to the inability of FedGov to raise enough revenue to pay its bills.
Arguably, part of the reason England was not totally wiped out by WWII was the Suez Crisis of 1956 – which made it very plain to the English that their day in the sun as the world’s foremost Imperialist was over, leading to reductions in their imperial expenditures. By analogy, what if the US decided that it is time for the rest of the world to look after itself, quit NATO, closed all overseas bases, and cut military expenditures by 50% … or 80%? That would make the “Ferguson’s Law” breach worse (interest expenses much greater than military costs), but would definitely be a major improvement to the US’s financial situation.
Isn’t Ferguson a long-time, virulent Trump hater? In any case, the WSJ is a globalist publication along the lines of the Ecommunist. This piece has suspect written all over it.
I’m really looking forward to it: Trump’s humiliation. Bring it on." (link)
Moreover, Ferguson has been pretty much wrong about Trump on almost every front. Ferguson’s Wikipedia page lists many of these errors. It’s okay to be wrong sometimes but there’s an eerie consistency to it in his case.
More significantly, he’s a member in good standing of the GAE. He was knighted by King Chuck and writes for all the ‘best’ publications (WSJ, BBC, FT, Sunday Times). He’s certainly not a leftist but the left/right distinction has lost much of its meaning. Globalist/nationalist is more meaningful and he’s more aligned with the globalists.