Tuesday, July 13, 2010
Everything will be ok...Everything will be ok...
Historian warns of sudden collapse of American ‘empire’
Harvard professor and prolific author Niall Ferguson opened the 2010 Aspen Ideas Festival Monday with a stark warning about the increasing prospect of the American “empire” suddenly collapsing due to the country’s rising debt level.
“I think this is a problem that is going to go live really soon,” Ferguson said. “In that sense, I mean within the next two years. Because the whole thing, fiscally and other ways, is very near the edge of chaos. And we’ve seen already in Greece what happens when the bond market loses faith in your fiscal policy.”
Ferguson said empires — such as the former Soviet Union and the Roman empire — can collapse quite quickly and the tipping point is often when the cost of servicing an empire’s debt is larger than the cost of its defense budget.
“That has not been the case I think at any point in U.S. history,” Ferguson said. “It will be the case in the next five years.”
Ferguson was conscious of opening the Ideas Festival on such a stark note.
“Walter Isaacson, the leader of this great institution said, ‘Don’t be too dark!,’” Ferguson said.
The affable British scholar tried to keep it light. He used a stage whisper to tell the Aspen Institute audience, “I know you’re not comfortable with the word ‘empire,’ especially just after the Fourth of July, but you are the Redcoats now.”
He said the U.S. is now deeply in the red as a country because of a combination of the Great Recession, the resulting federal stimulus and financial bailout programs, two wars, the Bush tax cuts, and a growth in social entitlement programs.
And economic debt can lead to a sudden loss of military power and global respect, Ferguson said.