Why Do I Have to Put Up With Niall Ferguson?

November 17, 2008

From the guy who taught us why empire was a good thing (during the invasion of Iraq, if I remember correctly), comes this bit of insipid nonsense about the G20 meeting and the need for international cooperation:

More than anything else, it has been China’s strategy of dollar reserve accumulation that has financed America’s debt habit. Chinese savings were a key reason U.S. long-term interest rates stayed low and the borrowing binge kept going. Now that the age of leverage is over, "Chimerica" — the partnership between the big saver and the big spender — is key.

This would have been really great stuff if it had been written in 2003. These days, even my cat is able to debate the finer points of the Bernanke savings glut argument. I guess if you teach at Harvard, you can get away with this sort of thing.

"Chimerica" is, by the way, incredibly annoying for some reason. Reminds of that equally annoying term "Chicom" — a Cold War staple. Here is another bit o’ wisdom:

There also needs to be an agreement to avoid a rout in the dollar market and the bond market, which is what will happen if the Chinese stop buying U.S. government bonds, the amount of which is now set to increase massively.

The alternative to such a Chimerican deal is for the Chinese to turn inward, devoting their energies to "market socialism in one country," increasing the domestic consumption of Chinese products and turning away from trade as the engine of growth.

I’m no expert, but isn’t there a global call for China to stimulate consumption? I suppose you could call this turning inward, but when you increase consumer demand, you also do really neat things like increase purchases of imported goods, something that the U.S. and EU would appreciate right about now.

The latest trade numbers showed a big ass jump in the trade surplus, which was not from a huge increase in demand for Chinese exports but from a drop in Chinese demand for foreign imports.

And arguing that China should continue buying US bonds? If that is a good place to park their money, fine. Again, however, it seems that most folks think that taking some of those dollars and plowing them into a stimulus package makes a great deal of sense. China was a big purchaser of mortgage-backed securities once upon a time, remember. That doesn’t seem to have been such a great decision anymore.

Man, the Post will print anything these days.