From the Times Sunday magazine. He seems pretty optimistic about how long this can go on, but doesn't give any concrete reasons. I think historical precedent may be a poor guide here, given the volatile nature of global financial markets today.
"Meanwhile, the United States may be discovering what the British found in their imperial heyday. If you are a truly powerful empire, you can borrow a lot of money at surprisingly reasonable rates. Today's deficits are in fact dwarfed in relative terms by the amounts the British borrowed to finance their Global War on (French) Terror between 1793 and 1815. Yet British long-term rates in that era averaged just 4.77 percent, and the pound's exchange rate was restored to its prewar level within a few years of peace.
It is only when your power wanes -- as the British learned after 1945 -- that owing a fortune in your own currency becomes a real problem. As opposed, that is, to someone else's problem."
Pessimism of the Intellect, Optimism of the Will Favorite posts | Manifold podcast | Twitter: @hsu_steve
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7 comments:
Why am I not impressed? Niall Ferguson has hit the right metaphor of the time, America as Imperial Britain. We should happily get on with colonizing India and make his work complete. But, we are not Imperial Britain of 1800 or 1850 or 1900. India is not about to be colonized, and not about to pay us tribute. Where then and why then does the thesis of the essay hold?
Anne
Anne,
What a perfect demolition of the thrust of the argument in the article!
MFA
PS: I am sure you and Steve noted what Buttonwood had to say on the dollar?
http://www.economist.com/agenda/displayStory.cfm?story_id=3761805
...
This is perhaps not the week to air such apocalyptic concerns, though they are much on Buttonwood’s mind. In the end, what foreign central bankers have it in their power to do is to reveal before all the world that the mighty American economic empire has no clothes—not even a pair of little fuchsia-coloured shoes.
Thanks, MFA :)
Anne
Thanks, MFA :)
Anne
Thanks, MFA :)
Anne
Thanks, MFA :)
Anne
Thanks, MFA :)
Anne
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