Niall Ferguson: You Ask The Questions

The historian answers your questions, such as 'Do we face recession or depression?' and 'Where should I invest my cash?'
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The Independent Online

Who would you like to see win the US election? Ian Barker, Brighton

I was one of John McCain's foreign policy advisers when he was campaigning for the Republican nomination, but haven't been involved since the presidential campaign became a two-horse race. I think McCain was by a wide margin the best of the Republican candidates, but I can't see him beating Barack Obama, who has run one of the most inspiring and at the same time disciplined campaigns of modern times.

Like so many historic events, this has a financial back-story. Without the credit crunch I think they'd be neck and neck. But the economic crisis is surely going to hand victory to the Democrat, whose cool, calm and collected manner are an asset at a time of panic and pessimism. I will not be sorry. Obama has the potential to be a great president – and who could fail to be uplifted by the prospect of a black man as commander in chief, 40 years after the assassination of Martin Luther King?

What do you think are the biggest challenges he will face? Stephen Mottram, Newcastle

The economy, the economy and the economy – followed by Iran, followed by his own party in Congress. The trouble is that Obama's plan to spend around $1.3 trillion in tax cuts and new spending is going to be very hard to implement when over a trillion has already been committed by his predecessor to the financial bailout. At some point the bond market may take fright at the explosion of government borrowing. Alternatively, the US may be heading for a period of Japanese-style stagnation and deflation, no matter how much the Treasury throws at the problem. Neither scenario is going to make the next president's life easy.

Is the US in terminal decline? MARK SUTTON, COLCHESTER

No empire lasts forever, but the US itself is not in terminal decline. It has an immensely successful political system. Its economy remains the most attractive place in the world for entrepreneurs and innovators. It's social system is wonderfully good at integrating new immigrants. Sure, there are problems, but I would say the EU looks much more vulnerable at the moment. And let's not forget that the US is still miles ahead of the competition when it comes to military power.



What does Obama's candidacy say about race relations in the US? TINA WEEKS, BRISTOL

That there has been a real change of attitudes. Some Americans may still harbour racial prejudice, but it is no longer socially acceptable to express it. That's one of the most heartening changes I have witnessed in the U.S. since I first started going there in 1981.



Will the world face recession in the next few years, or depression? PATRICK HOBSON, LONDON SE8

Call it a Great Recession. It won't be as bad as the Great Depression of 1929-32 (which actually dragged on until the Second World War in many countries). But it will almost certainly be a deeper and longer recession than anything we've experienced since the mid 1970s.



Given recent events, has your view of markets changed? MADDY PHILLIPS, LONDON N19

My new book The Ascent of Money was written in the expectation that a major liquidity crisis was going to strike financial markets in the near future, and that we would see a herd-like switch from greed to fear. This happens quite frequently in financial history. So I am not surprised and my view hasn't changed. As Churchill said of democracy, the free market is the worst of all possible systems, except for all those others that have been tried from time to time. In the book, I try to show that the financial system has an evolutionary character. That means that periodic crises are inevitable.



Where would you advise me to invest/save my money at the moment? DAVID ADAMS, BIRMINGHAM

Well, you're doing the right thing by saving. The key thing is to reduce indebtedness if you can, because it's leverage that's most dangerous at a time like this. A diversified portfolio of stocks and bonds, domestic and foreign securities, some real estate and some other assets (like art) remains the best bet. But the devil lies in the detail.

There are some bargains out there among small-cap US companies. Right now, I would be searching Silicon Valley for the next Google. Remember: Microsoft and Apple were both established in the depths of the mid-1970s stagflation.

Should Britain join the euro? ELLEN POWELL, LONDON W6

No. The last thing you want, especially in a financial crisis, is to have given away control of your monetary policy.



Where will the balance of global power lie in 20 years' time? Will the Asian Century be well and truly up and running? MICHAEL WILKES, ALDERSHOT

In The War of the World, I argued that the Asian century got underway nearly a century ago with the rise of Japan and its emergence as a credible rival to the European empires! Japan's had the second biggest economy in the world for decades now, so this is not a new story. The real issue is how far and for how long China can sustain the growth we have seen in the past three decades. If it can, then by mid-century it will be the biggest economy in the world. Then we may need to ask if we are entering the Chinese century. But remember: Japan was also projected to overtake the US and never made it. Economic history is seldom a smooth upward curve.



What moment is there from financial history from which we can most profitably learn? HENRY JOHNSON, NORWICH

I keep thinking that we are living through 1914 without the war – a huge liquidity crisis requiring all kinds of extraordinary emergency measures and extensions of state power over the financial system. In the past this only happened in time of war.

Who do you think will win the next UK election and why? BRIAN DOUGLAS, CARDIFF

The Conservatives because the Labour Party has so obviously failed to deliver the kind of improvements to public services that it promised more than 10 years ago, and has also presided over the worst financial crisis since an earlier Labour government had to call in the IMF. Things are going to be very ugly for the UK economy next year. If Gordon Brown were a stock, I would short him. His recent revival in the polls is a sucker's rally.



What do you think about the way the BBC has handled the Russell Brand/Jonathan Ross affair? LYNN THOMAS, LONDON NW6

I am afraid I do not know who these people are. Nor was I aware that they are having an affair.



Should the BBC be privatised? LIAM BRYAN, WORCESTER

Yes. There is no credible justification for the licence fee, which simply subsidises one bloated broadcaster.



Who do you think was the greatest British prime minister. And who was the greatest US president? GAVIN PHILLIPS, CANTERBURY

Churchill was the greatest prime minister, Roosevelt the greatest president.



You wrote a history of the Rothschild family. What do you make of George Osborne's recent brush with one of the younger inheritors? IAN CLARKE, DEVIZES

I think the episode merely illustrates the danger of talking to journalists about private conversations. This applies whether or not the conversation was with Peter Mandelson, whether or not it was on a yacht, and whether or not a Rothschild was present.



Which historian has had the biggest influence on you? CHARLIE BLAKE, MANCHESTER

Probably A.J.P. Taylor, who was a wonderfully gifted writer of diplomatic history, but my principal debts as a financial historian are to Charles Kindleberger, David Landes and Fritz Stern.

How do you manage to produce so many books so quickly? NIGEL PORTER, BARNET

By neglecting my family.

Niall Feguson's 'The Ascent of Money' has just been published by Allen Lane at £25

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