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Niall Ferguson - renowned professor of History and Business Administration at Harvard, Senior
Research Fellow at Oxford and the Hoover Institute, and author of 'The Ascent of Money: A
Financial History of the World' - provides a riveting historical perspective on the financial
crisis.
He discusses at length:
(a) the historically bumpy evolution of the financial system via periodic
crisis;
(b) the boom-bust cycle of assets prices due to never changing human psyche;
(c) the severity
of the current financial crisis on account of excessive risks undertaken by investors;
(d) the poor appreciation of risk in modern financial services industry due to general
ignorance of financial history and reliance on limited duration mathematical models;
(e) the origins of the sub-prime
crisis, including the political dogma of increasing housing ownership rates and the moral hazard
introduced by securitization process;
(f) the susceptibility of insurance industry to financial
crisis on account of entry into credit default swaps (CDS) market;
(g) the fallacy of Greenspan
Fed's doctrine of focusing on consumer prices and ignoring asset prices; and
(h) the role of 1997-98
Asian financial crisis in facilitating massive capital infusions into the United States over the last
decade.
In addition, he delves into:
(i) the unique China-America relationship that enabled US consumer
to engage in profligate spending as well as speculation on housing prices; and
(j) the long-term impact
on US power and dollar's strength in light of the massive funding needs of the US to fix the financial
system and revive its economy.
This interview was recorded in October 2008.
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