Thursday, February 26, 2009

History by economists vs. economics by a historian

Niall Ferguson is a terrific speaker and historian who has a relatively sanguine outlook for the next decade or so in an article in the Globe and Mail entitled, however, “There will be blood.”  His PBS program below is really fun.

I say his outlook is sanguine because he doesn’t foresee any ekpyrosis, as economists Straus and Howe do (as detailed in this post).  He doesn’t foresee any wars other than regional, civil-type wars (no “world war”) because America is simply too powerful for anyone to contemplate taking on.  And he doesn’t foresee the social contract in America breaking down, as Democratic redistributionist tax policies take hold. 

But in the back of my mind I am wondering:  what happens if the whole post-WWII Bretton Woods monetary system, fatally injured when Nixon took America off gold and currencies started to float, goes supernova and no one knows what is money anymore?  The economists Strauss and Howe are careful to characterize history as a nonlinear process, full of surprises, and Ferguson seems to be thinking more like a trend-extrapolating economist in the article referenced above.

In the afterglow of Obama’s shockingly awesome budget speech that validated the ever expanding Bernanke bailouts I have noticed a certain deadness entering the tone of the blogosphere, and I think it is this thought creeping into consciousness, that if the U.S. hyper-inflates all bets may be off as barter comes back into style. 

See a couple of charts for America’s current fiscal and monetary “settings.”

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