{"id":257850,"date":"2018-11-01T14:24:22","date_gmt":"2018-11-01T18:24:22","guid":{"rendered":"https:\/\/news.harvard.edu\/gazette\/?p=257850"},"modified":"2023-11-08T20:43:53","modified_gmt":"2023-11-09T01:43:53","slug":"at-harvard-niall-ferguson-reflects-on-financial-crisis","status":"publish","type":"post","link":"https:\/\/news.harvard.edu\/gazette\/story\/2018\/11\/at-harvard-niall-ferguson-reflects-on-financial-crisis\/","title":{"rendered":"Lessons of the last financial crisis"},"content":{"rendered":"\n\t
\"Niall

Center for European Studies fellow Niall Ferguson speaks Wednesday at the Kennedy School.<\/p>

Photo by Olivia Falcigno<\/p><\/figcaption><\/figure>\n\n\t

\n\t\t\t\n\t\t\tWork & Economy\t\t<\/a>\n\t\t\n\t\t

\n\t\tLessons of the last financial crisis\t<\/h1>\n\n\t\n\t\t\t<\/div>\n\t\t\n\t
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\n\t\tBrett Milano\t<\/p>\n\t\t\t

\n\t\t\tHarvard Correspondent\t\t<\/p>\n\t\t\t\t\t<\/address>\n\t\t<\/div>\n\n\t\t

\n\t\t\tAt Harvard, Niall Ferguson says a key going forward may be U.S.-China relationship\t\t<\/h2>\n\t\t\n<\/header>\n\n\n\n
\n\n\n\t\t

The last global financial crisis was just beginning when Niall Ferguson published his seminal book \u201cThe Ascent of Money\u201d in 2008. He came to the Harvard Kennedy School on Wednesday to warn that history could repeat itself.<\/p>\n

In an interview conducted by Graham Allison, the Douglas Dillon Professor of Government at the School, Ferguson recalled that just as he was making final revisions to the book, it became clear to him that the Lehman Brothers investment bank was about to fold and the crisis was soon to begin.<\/p>\n

\u201cI had to rewrite the introduction and the conclusion, changing the future tense to the present,\u201d said Ferguson, formerly the Laurence Tisch Professor of History at Harvard and now a senior fellow at the Hoover Institution. The book broke the global financial system down into six main components: money, bonds, equity, insurance, housing, and globalization. \u201cI presented the book as six stories, six reasons why the crisis was happening just as you were reading it.\u201d<\/p>\n

To understand 2008 fully, he said, one needed to look at how those six factors worked together. Of the common theory that the crisis happened because of deregulation, he said, \u201cYou should dismiss that as a cartoon.\u201d<\/p>\n

A new edition of the book will include two fresh chapters that look at the crisis and how it avoided turning into a second Great Depression. As Allison suggested, one saving grace in 2008 was applied history, specifically Federal Reserve chair Ben Bernanke\u2019s studies of the 1930s disaster. \u201cThat\u2019s a fantastic example,\u201d Ferguson said. \u201cBernanke had studied the Great Depression, so as the crisis intensified he was in the position to identify and recognize the symptoms of something much bigger than anyone in the room had experienced in their lifetimes.\u201d<\/p>\n

Ferguson\u2019s own Harvard students, he said, could have anticipated the choices that Bernanke would make. \u201cIf you had taken the class on financial history I was teaching at the time, you would have read Milton Friedman and Anna Schwartz\u2019s \u2018A Monetary History of the United States, 1867\u20121960.\u2019 And you would have known that the Fed [in 2008] would do exactly the opposite of what the Fed did during the Great Depression, because they did everything wrong the first time.\u201d<\/p>\n\r\n

“The breakdown of [China-U.S. financial relations] is bad news for the biggest corporations in the world, and that\u2019s what I am keeping an eye out for.”<\/p>\nNiall Ferguson<\/cite><\/blockquote>\r\n\n

One of the main reasons another depression was avoided, Ferguson said, was the global component, namely the stimulus money the U.S. received from China. \u201cIf the U.S. had done everything it did and China had done nothing, things would have worked out very different,\u201d he said. The alliance proved so pivotal that Ferguson termed it \u201cChinamerica,\u201d a pun on \u201cchimera,\u201d since it was always a little mysterious. \u201cThe relationship survived the crisis despite some pretty nasty rhetoric; we called them currency manipulators. But China didn\u2019t sell their great accumulation of U.S. bonds.\u201d<\/p>\n

China, he said, may well be the source of the next global crisis. \u201cPeople have been predicting a China crisis on an annual basis for the past 15 to 20 years,\u201d he said, and the decline of China-U.S. financial relations may prove the tipping point. \u201cThe breakdown of Chinamerica is bad news for the biggest corporations in the world, and that\u2019s what I am keeping an eye out for. The best-case scenario is that China\u2019s growth rate steadily declines. In the worst case, there is a crisis. Either way, the outlook is a somewhat bleak one.\u201d<\/p>\n

One ominous sign, he said, lies in the current political climate. \u201cThe Republican Party, in embracing [President] Trump\u2019s populism, threw its fiscal responsibility out the window. Suddenly deficits don\u2019t matter. This is a problem that is going to get serious relatively quickly. I find it hard to figure out what the politics will be when there is no credible fiscal conservative left.\u201d<\/p>\n

During audience questions afterwards, one student asked Ferguson if he\u2019d neglected to mention the role of fraud and other white-collar crime in triggering the 2008 crisis. Ferguson replied that almost no bankers ever went to jail.<\/p>\n

\u201cIs that because we decided to turn a blind eye to white-collar crime, or is it because they committed no crimes, [they only] bent the rules? I think it\u2019s the latter. It is really hard to get convictions when people were essentially complying with regulations,\u201d he said.<\/p>\n

But doing what\u2019s strictly legal, he emphasized, isn\u2019t the same as doing the right thing. \u201cAs long as they were compliant, nobody felt any compunction about doing things that were morally wrong, if not technically criminal.\u201d<\/p>\n\n\n<\/div>\n\n\t\t","protected":false},"excerpt":{"rendered":"

The last global financial crisis was just beginning when Niall Ferguson published his seminal book \u201cThe Ascent of Money\u201d in 2008. 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loading=\"eager\" src=\"https:\/\/news.harvard.edu\/gazette\/wp-content\/uploads\/2018\/11\/103118_Ferguson_OF03A.jpg\" width=\"2500\"\/><figcaption class=\"wp-element-caption\"><p class=\"wp-element-caption--caption\">Center for European Studies fellow Niall Ferguson speaks Wednesday at the Kennedy School.<\/p><p class=\"wp-element-caption--credit\">Photo by Olivia Falcigno<\/p><\/figcaption><\/figure>\n","innerContent":["<figure class=\"wp-block-image\"><img alt=\"Niall Ferguson.\" height=\"1667\" loading=\"eager\" src=\"https:\/\/news.harvard.edu\/gazette\/wp-content\/uploads\/2018\/11\/103118_Ferguson_OF03A.jpg\" width=\"2500\"\/><figcaption class=\"wp-element-caption\"><p class=\"wp-element-caption--caption\">Center for European Studies fellow Niall Ferguson speaks Wednesday at the Kennedy School.<\/p><p class=\"wp-element-caption--credit\">Photo by Olivia Falcigno<\/p><\/figcaption><\/figure>\n"],"rendered":"<header\n\tclass=\"wp-block-harvard-gazette-article-header alignfull article-header is-style-full-width-text-below centered-image\"\n\tstyle=\" \"\n>\n\t<figure class=\"wp-block-image\"><img alt=\"Niall Ferguson.\" height=\"1667\" loading=\"eager\" src=\"https:\/\/news.harvard.edu\/gazette\/wp-content\/uploads\/2018\/11\/103118_Ferguson_OF03A.jpg\" width=\"2500\"\/><figcaption class=\"wp-element-caption\"><p class=\"wp-element-caption--caption\">Center for European Studies fellow Niall Ferguson speaks Wednesday at the Kennedy School.<\/p><p class=\"wp-element-caption--credit\">Photo by Olivia Falcigno<\/p><\/figcaption><\/figure>\n\n\t<div class=\"article-header__content\">\n\t\t\t<a\n\t\t\tclass=\"article-header__category\"\n\t\t\thref=\"https:\/\/news.harvard.edu\/gazette\/section\/business-economy\/\"\n\t\t>\n\t\t\tWork & Economy\t\t<\/a>\n\t\t\n\t\t<h1 class=\"article-header__title wp-block-heading \">\n\t\tLessons of the last financial crisis\t<\/h1>\n\n\t\n\t\t\t<\/div>\n\t\t\n\t<div class=\"article-header__meta\">\n\t\t<div class=\"wp-block-post-author\">\n\t\t\t<address class=\"wp-block-post-author__content\">\n\t\t\t\t\t<p class=\"author wp-block-post-author__name\">\n\t\tBrett Milano\t<\/p>\n\t\t\t<p class=\"wp-block-post-author__byline\">\n\t\t\tHarvard Correspondent\t\t<\/p>\n\t\t\t\t\t<\/address>\n\t\t<\/div>\n\n\t\t<time class=\"article-header__date\" datetime=\"2018-11-01\">\n\t\t\tNovember 1, 2018\t\t<\/time>\n\n\t\t<span class=\"article-header__reading-time\">\n\t\t\t4 min read\t\t<\/span>\n\t<\/div>\n\n\t\n\t\t\t<h2 class=\"article-header__subheading wp-block-heading\">\n\t\t\tAt Harvard, Niall Ferguson says a key going forward may be U.S.-China relationship\t\t<\/h2>\n\t\t\n<\/header>\n"},"2":{"blockName":"core\/group","attrs":{"templateLock":false,"metadata":{"name":"Article content"},"align":"wide","layout":{"type":"constrained","justifyContent":"center"},"tagName":"div","lock":[],"className":"","style":[],"backgroundColor":"","textColor":"","gradient":"","fontSize":"","fontFamily":"","borderColor":"","ariaLabel":"","anchor":""},"innerBlocks":[{"blockName":"core\/freeform","attrs":{"content":"","lock":[],"metadata":[]},"innerBlocks":[],"innerHTML":"\n\t\t<p>The last global financial crisis was just beginning when Niall Ferguson published his seminal book \u201cThe Ascent of Money\u201d in 2008. He came to the Harvard Kennedy School on Wednesday to warn that history could repeat itself.<\/p>\n<p>In an interview conducted by Graham Allison, the Douglas Dillon Professor of Government at the School, Ferguson recalled that just as he was making final revisions to the book, it became clear to him that the Lehman Brothers investment bank was about to fold and the crisis was soon to begin.<\/p>\n<p>\u201cI had to rewrite the introduction and the conclusion, changing the future tense to the present,\u201d said Ferguson, formerly the Laurence Tisch Professor of History at Harvard and now a senior fellow at the Hoover Institution. The book broke the global financial system down into six main components: money, bonds, equity, insurance, housing, and globalization. \u201cI presented the book as six stories, six reasons why the crisis was happening just as you were reading it.\u201d<\/p>\n<p>To understand 2008 fully, he said, one needed to look at how those six factors worked together. Of the common theory that the crisis happened because of deregulation, he said, \u201cYou should dismiss that as a cartoon.\u201d<\/p>\n<p>A new edition of the book will include two fresh chapters that look at the crisis and how it avoided turning into a second Great Depression. As Allison suggested, one saving grace in 2008 was applied history, specifically Federal Reserve chair Ben Bernanke\u2019s studies of the 1930s disaster. \u201cThat\u2019s a fantastic example,\u201d Ferguson said. \u201cBernanke had studied the Great Depression, so as the crisis intensified he was in the position to identify and recognize the symptoms of something much bigger than anyone in the room had experienced in their lifetimes.\u201d<\/p>\n<p>Ferguson\u2019s own Harvard students, he said, could have anticipated the choices that Bernanke would make. \u201cIf you had taken the class on financial history I was teaching at the time, you would have read Milton Friedman and Anna Schwartz\u2019s \u2018A Monetary History of the United States, 1867\u20121960.\u2019 And you would have known that the Fed [in 2008] would do exactly the opposite of what the Fed did during the Great Depression, because they did everything wrong the first time.\u201d<\/p>\n","innerContent":["\n\t\t<p>The last global financial crisis was just beginning when Niall Ferguson published his seminal book \u201cThe Ascent of Money\u201d in 2008. He came to the Harvard Kennedy School on Wednesday to warn that history could repeat itself.<\/p>\n<p>In an interview conducted by Graham Allison, the Douglas Dillon Professor of Government at the School, Ferguson recalled that just as he was making final revisions to the book, it became clear to him that the Lehman Brothers investment bank was about to fold and the crisis was soon to begin.<\/p>\n<p>\u201cI had to rewrite the introduction and the conclusion, changing the future tense to the present,\u201d said Ferguson, formerly the Laurence Tisch Professor of History at Harvard and now a senior fellow at the Hoover Institution. The book broke the global financial system down into six main components: money, bonds, equity, insurance, housing, and globalization. \u201cI presented the book as six stories, six reasons why the crisis was happening just as you were reading it.\u201d<\/p>\n<p>To understand 2008 fully, he said, one needed to look at how those six factors worked together. Of the common theory that the crisis happened because of deregulation, he said, \u201cYou should dismiss that as a cartoon.\u201d<\/p>\n<p>A new edition of the book will include two fresh chapters that look at the crisis and how it avoided turning into a second Great Depression. As Allison suggested, one saving grace in 2008 was applied history, specifically Federal Reserve chair Ben Bernanke\u2019s studies of the 1930s disaster. \u201cThat\u2019s a fantastic example,\u201d Ferguson said. \u201cBernanke had studied the Great Depression, so as the crisis intensified he was in the position to identify and recognize the symptoms of something much bigger than anyone in the room had experienced in their lifetimes.\u201d<\/p>\n<p>Ferguson\u2019s own Harvard students, he said, could have anticipated the choices that Bernanke would make. \u201cIf you had taken the class on financial history I was teaching at the time, you would have read Milton Friedman and Anna Schwartz\u2019s \u2018A Monetary History of the United States, 1867\u20121960.\u2019 And you would have known that the Fed [in 2008] would do exactly the opposite of what the Fed did during the Great Depression, because they did everything wrong the first time.\u201d<\/p>\n"],"rendered":"\n\t\t<p>The last global financial crisis was just beginning when Niall Ferguson published his seminal book \u201cThe Ascent of Money\u201d in 2008. He came to the Harvard Kennedy School on Wednesday to warn that history could repeat itself.<\/p>\n<p>In an interview conducted by Graham Allison, the Douglas Dillon Professor of Government at the School, Ferguson recalled that just as he was making final revisions to the book, it became clear to him that the Lehman Brothers investment bank was about to fold and the crisis was soon to begin.<\/p>\n<p>\u201cI had to rewrite the introduction and the conclusion, changing the future tense to the present,\u201d said Ferguson, formerly the Laurence Tisch Professor of History at Harvard and now a senior fellow at the Hoover Institution. The book broke the global financial system down into six main components: money, bonds, equity, insurance, housing, and globalization. \u201cI presented the book as six stories, six reasons why the crisis was happening just as you were reading it.\u201d<\/p>\n<p>To understand 2008 fully, he said, one needed to look at how those six factors worked together. Of the common theory that the crisis happened because of deregulation, he said, \u201cYou should dismiss that as a cartoon.\u201d<\/p>\n<p>A new edition of the book will include two fresh chapters that look at the crisis and how it avoided turning into a second Great Depression. As Allison suggested, one saving grace in 2008 was applied history, specifically Federal Reserve chair Ben Bernanke\u2019s studies of the 1930s disaster. \u201cThat\u2019s a fantastic example,\u201d Ferguson said. \u201cBernanke had studied the Great Depression, so as the crisis intensified he was in the position to identify and recognize the symptoms of something much bigger than anyone in the room had experienced in their lifetimes.\u201d<\/p>\n<p>Ferguson\u2019s own Harvard students, he said, could have anticipated the choices that Bernanke would make. \u201cIf you had taken the class on financial history I was teaching at the time, you would have read Milton Friedman and Anna Schwartz\u2019s \u2018A Monetary History of the United States, 1867\u20121960.\u2019 And you would have known that the Fed [in 2008] would do exactly the opposite of what the Fed did during the Great Depression, because they did everything wrong the first time.\u201d<\/p>\n"},{"blockName":"core\/quote","attrs":{"value":"<cite>Niall Ferguson<\/cite>","citation":"Niall Ferguson","textAlign":"","lock":[],"metadata":[],"align":"","className":"","style":[],"backgroundColor":"","textColor":"","gradient":"","fontSize":"","fontFamily":"","borderColor":"","layout":[],"anchor":""},"innerBlocks":[{"blockName":"core\/freeform","attrs":{"content":"","lock":[],"metadata":[]},"innerBlocks":[],"innerHTML":"<p>\"The breakdown of [China-U.S. financial relations] is bad news for the biggest corporations in the world, and that\u2019s what I am keeping an eye out for.\"<\/p>\n","innerContent":["<p>\"The breakdown of [China-U.S. financial relations] is bad news for the biggest corporations in the world, and that\u2019s what I am keeping an eye out for.\"<\/p>\n"],"rendered":"<p>\"The breakdown of [China-U.S. financial relations] is bad news for the biggest corporations in the world, and that\u2019s what I am keeping an eye out for.\"<\/p>\n"}],"innerHTML":"<blockquote class=\"wp-block-quote\"><cite>Niall Ferguson<\/cite><\/blockquote>","innerContent":["<blockquote class=\"wp-block-quote\">","<cite>Niall Ferguson<\/cite><\/blockquote>"],"rendered":"<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\"><p>\"The breakdown of [China-U.S. financial relations] is bad news for the biggest corporations in the world, and that\u2019s what I am keeping an eye out for.\"<\/p>\n<cite>Niall Ferguson<\/cite><\/blockquote>"},{"blockName":"core\/freeform","attrs":{"content":"","lock":[],"metadata":[]},"innerBlocks":[],"innerHTML":"\n<p>One of the main reasons another depression was avoided, Ferguson said, was the global component, namely the stimulus money the U.S. received from China. \u201cIf the U.S. had done everything it did and China had done nothing, things would have worked out very different,\u201d he said. The alliance proved so pivotal that Ferguson termed it \u201cChinamerica,\u201d a pun on \u201cchimera,\u201d since it was always a little mysterious. \u201cThe relationship survived the crisis despite some pretty nasty rhetoric; we called them currency manipulators. But China didn\u2019t sell their great accumulation of U.S. bonds.\u201d<\/p>\n<p>China, he said, may well be the source of the next global crisis. \u201cPeople have been predicting a China crisis on an annual basis for the past 15 to 20 years,\u201d he said, and the decline of China-U.S. financial relations may prove the tipping point. \u201cThe breakdown of Chinamerica is bad news for the biggest corporations in the world, and that\u2019s what I am keeping an eye out for. The best-case scenario is that China\u2019s growth rate steadily declines. In the worst case, there is a crisis. Either way, the outlook is a somewhat bleak one.\u201d<\/p>\n<p>One ominous sign, he said, lies in the current political climate. \u201cThe Republican Party, in embracing [President] Trump\u2019s populism, threw its fiscal responsibility out the window. Suddenly deficits don\u2019t matter. This is a problem that is going to get serious relatively quickly. I find it hard to figure out what the politics will be when there is no credible fiscal conservative left.\u201d<\/p>\n<p>During audience questions afterwards, one student asked Ferguson if he\u2019d neglected to mention the role of fraud and other white-collar crime in triggering the 2008 crisis. Ferguson replied that almost no bankers ever went to jail.<\/p>\n<p>\u201cIs that because we decided to turn a blind eye to white-collar crime, or is it because they committed no crimes, [they only] bent the rules? I think it\u2019s the latter. It is really hard to get convictions when people were essentially complying with regulations,\u201d he said.<\/p>\n<p>But doing what\u2019s strictly legal, he emphasized, isn\u2019t the same as doing the right thing. \u201cAs long as they were compliant, nobody felt any compunction about doing things that were morally wrong, if not technically criminal.\u201d<\/p>\n","innerContent":["\n<p>One of the main reasons another depression was avoided, Ferguson said, was the global component, namely the stimulus money the U.S. received from China. \u201cIf the U.S. had done everything it did and China had done nothing, things would have worked out very different,\u201d he said. The alliance proved so pivotal that Ferguson termed it \u201cChinamerica,\u201d a pun on \u201cchimera,\u201d since it was always a little mysterious. \u201cThe relationship survived the crisis despite some pretty nasty rhetoric; we called them currency manipulators. But China didn\u2019t sell their great accumulation of U.S. bonds.\u201d<\/p>\n<p>China, he said, may well be the source of the next global crisis. \u201cPeople have been predicting a China crisis on an annual basis for the past 15 to 20 years,\u201d he said, and the decline of China-U.S. financial relations may prove the tipping point. \u201cThe breakdown of Chinamerica is bad news for the biggest corporations in the world, and that\u2019s what I am keeping an eye out for. The best-case scenario is that China\u2019s growth rate steadily declines. In the worst case, there is a crisis. Either way, the outlook is a somewhat bleak one.\u201d<\/p>\n<p>One ominous sign, he said, lies in the current political climate. \u201cThe Republican Party, in embracing [President] Trump\u2019s populism, threw its fiscal responsibility out the window. Suddenly deficits don\u2019t matter. This is a problem that is going to get serious relatively quickly. I find it hard to figure out what the politics will be when there is no credible fiscal conservative left.\u201d<\/p>\n<p>During audience questions afterwards, one student asked Ferguson if he\u2019d neglected to mention the role of fraud and other white-collar crime in triggering the 2008 crisis. Ferguson replied that almost no bankers ever went to jail.<\/p>\n<p>\u201cIs that because we decided to turn a blind eye to white-collar crime, or is it because they committed no crimes, [they only] bent the rules? I think it\u2019s the latter. It is really hard to get convictions when people were essentially complying with regulations,\u201d he said.<\/p>\n<p>But doing what\u2019s strictly legal, he emphasized, isn\u2019t the same as doing the right thing. \u201cAs long as they were compliant, nobody felt any compunction about doing things that were morally wrong, if not technically criminal.\u201d<\/p>\n"],"rendered":"\n<p>One of the main reasons another depression was avoided, Ferguson said, was the global component, namely the stimulus money the U.S. received from China. \u201cIf the U.S. had done everything it did and China had done nothing, things would have worked out very different,\u201d he said. The alliance proved so pivotal that Ferguson termed it \u201cChinamerica,\u201d a pun on \u201cchimera,\u201d since it was always a little mysterious. \u201cThe relationship survived the crisis despite some pretty nasty rhetoric; we called them currency manipulators. But China didn\u2019t sell their great accumulation of U.S. bonds.\u201d<\/p>\n<p>China, he said, may well be the source of the next global crisis. \u201cPeople have been predicting a China crisis on an annual basis for the past 15 to 20 years,\u201d he said, and the decline of China-U.S. financial relations may prove the tipping point. \u201cThe breakdown of Chinamerica is bad news for the biggest corporations in the world, and that\u2019s what I am keeping an eye out for. The best-case scenario is that China\u2019s growth rate steadily declines. In the worst case, there is a crisis. Either way, the outlook is a somewhat bleak one.\u201d<\/p>\n<p>One ominous sign, he said, lies in the current political climate. \u201cThe Republican Party, in embracing [President] Trump\u2019s populism, threw its fiscal responsibility out the window. Suddenly deficits don\u2019t matter. This is a problem that is going to get serious relatively quickly. I find it hard to figure out what the politics will be when there is no credible fiscal conservative left.\u201d<\/p>\n<p>During audience questions afterwards, one student asked Ferguson if he\u2019d neglected to mention the role of fraud and other white-collar crime in triggering the 2008 crisis. Ferguson replied that almost no bankers ever went to jail.<\/p>\n<p>\u201cIs that because we decided to turn a blind eye to white-collar crime, or is it because they committed no crimes, [they only] bent the rules? I think it\u2019s the latter. It is really hard to get convictions when people were essentially complying with regulations,\u201d he said.<\/p>\n<p>But doing what\u2019s strictly legal, he emphasized, isn\u2019t the same as doing the right thing. \u201cAs long as they were compliant, nobody felt any compunction about doing things that were morally wrong, if not technically criminal.\u201d<\/p>\n"}],"innerHTML":"\n<div class=\"wp-block-group alignwide\">\n\n\r\n\r\n\n\n<\/div>\n","innerContent":["\n<div class=\"wp-block-group alignwide\">\n\n","\r\n","\r\n","\n\n<\/div>\n"],"rendered":"\n<div class=\"wp-block-group alignwide has-global-padding is-content-justification-center is-layout-constrained wp-block-group-is-layout-constrained\">\n\n\n\t\t<p>The last global financial crisis was just beginning when Niall Ferguson published his seminal book \u201cThe Ascent of Money\u201d in 2008. He came to the Harvard Kennedy School on Wednesday to warn that history could repeat itself.<\/p>\n<p>In an interview conducted by Graham Allison, the Douglas Dillon Professor of Government at the School, Ferguson recalled that just as he was making final revisions to the book, it became clear to him that the Lehman Brothers investment bank was about to fold and the crisis was soon to begin.<\/p>\n<p>\u201cI had to rewrite the introduction and the conclusion, changing the future tense to the present,\u201d said Ferguson, formerly the Laurence Tisch Professor of History at Harvard and now a senior fellow at the Hoover Institution. The book broke the global financial system down into six main components: money, bonds, equity, insurance, housing, and globalization. \u201cI presented the book as six stories, six reasons why the crisis was happening just as you were reading it.\u201d<\/p>\n<p>To understand 2008 fully, he said, one needed to look at how those six factors worked together. Of the common theory that the crisis happened because of deregulation, he said, \u201cYou should dismiss that as a cartoon.\u201d<\/p>\n<p>A new edition of the book will include two fresh chapters that look at the crisis and how it avoided turning into a second Great Depression. As Allison suggested, one saving grace in 2008 was applied history, specifically Federal Reserve chair Ben Bernanke\u2019s studies of the 1930s disaster. \u201cThat\u2019s a fantastic example,\u201d Ferguson said. \u201cBernanke had studied the Great Depression, so as the crisis intensified he was in the position to identify and recognize the symptoms of something much bigger than anyone in the room had experienced in their lifetimes.\u201d<\/p>\n<p>Ferguson\u2019s own Harvard students, he said, could have anticipated the choices that Bernanke would make. \u201cIf you had taken the class on financial history I was teaching at the time, you would have read Milton Friedman and Anna Schwartz\u2019s \u2018A Monetary History of the United States, 1867\u20121960.\u2019 And you would have known that the Fed [in 2008] would do exactly the opposite of what the Fed did during the Great Depression, because they did everything wrong the first time.\u201d<\/p>\n\r\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\"><p>\"The breakdown of [China-U.S. financial relations] is bad news for the biggest corporations in the world, and that\u2019s what I am keeping an eye out for.\"<\/p>\n<cite>Niall Ferguson<\/cite><\/blockquote>\r\n\n<p>One of the main reasons another depression was avoided, Ferguson said, was the global component, namely the stimulus money the U.S. received from China. \u201cIf the U.S. had done everything it did and China had done nothing, things would have worked out very different,\u201d he said. The alliance proved so pivotal that Ferguson termed it \u201cChinamerica,\u201d a pun on \u201cchimera,\u201d since it was always a little mysterious. \u201cThe relationship survived the crisis despite some pretty nasty rhetoric; we called them currency manipulators. But China didn\u2019t sell their great accumulation of U.S. bonds.\u201d<\/p>\n<p>China, he said, may well be the source of the next global crisis. \u201cPeople have been predicting a China crisis on an annual basis for the past 15 to 20 years,\u201d he said, and the decline of China-U.S. financial relations may prove the tipping point. \u201cThe breakdown of Chinamerica is bad news for the biggest corporations in the world, and that\u2019s what I am keeping an eye out for. The best-case scenario is that China\u2019s growth rate steadily declines. In the worst case, there is a crisis. Either way, the outlook is a somewhat bleak one.\u201d<\/p>\n<p>One ominous sign, he said, lies in the current political climate. \u201cThe Republican Party, in embracing [President] Trump\u2019s populism, threw its fiscal responsibility out the window. Suddenly deficits don\u2019t matter. This is a problem that is going to get serious relatively quickly. I find it hard to figure out what the politics will be when there is no credible fiscal conservative left.\u201d<\/p>\n<p>During audience questions afterwards, one student asked Ferguson if he\u2019d neglected to mention the role of fraud and other white-collar crime in triggering the 2008 crisis. Ferguson replied that almost no bankers ever went to jail.<\/p>\n<p>\u201cIs that because we decided to turn a blind eye to white-collar crime, or is it because they committed no crimes, [they only] bent the rules? I think it\u2019s the latter. It is really hard to get convictions when people were essentially complying with regulations,\u201d he said.<\/p>\n<p>But doing what\u2019s strictly legal, he emphasized, isn\u2019t the same as doing the right thing. \u201cAs long as they were compliant, nobody felt any compunction about doing things that were morally wrong, if not technically criminal.\u201d<\/p>\n\n\n<\/div>\n"}},"jetpack-related-posts":[{"id":31667,"url":"https:\/\/news.harvard.edu\/gazette\/story\/2009\/12\/niall-ferguson-wins-international-emmy-for-the-ascent-of-money\/","url_meta":{"origin":257850,"position":0},"title":"Niall Ferguson wins International Emmy for ‘The Ascent of Money’","author":"harvardgazette","date":"December 3, 2009","format":false,"excerpt":"Harvard economic historian Niall Ferguson\u2019s four-part documentary, \u201cThe Ascent of Money\u201d (2009), was named Best Documentary at the 37th International Emmy Awards in New York City on Nov. 23.","rel":"","context":"In "Campus & Community"","block_context":{"text":"Campus & Community","link":"https:\/\/news.harvard.edu\/gazette\/section\/campus-community\/"},"img":{"alt_text":"","src":"https:\/\/news.harvard.edu\/wp-content\/uploads\/2009\/12\/symposia_mc_050_605.jpg?resize=350%2C200","width":350,"height":200,"srcset":"https:\/\/news.harvard.edu\/wp-content\/uploads\/2009\/12\/symposia_mc_050_605.jpg?resize=350%2C200 1x, https:\/\/news.harvard.edu\/wp-content\/uploads\/2009\/12\/symposia_mc_050_605.jpg?resize=525%2C300 1.5x"},"classes":[]},{"id":30245,"url":"https:\/\/news.harvard.edu\/gazette\/story\/2009\/11\/harvard-historian-sees-banks-china-dragging-down-u-s\/","url_meta":{"origin":257850,"position":1},"title":"Harvard historian sees banks, China dragging down U.S.","author":"harvardgazette","date":"November 12, 2009","format":false,"excerpt":"Harvard economic historian Niall Ferguson, whose \u201cThe Ascent of Money\u201d book and TV series traced the world\u2019s financial system, last night painted a pessimistic prognosis for U.S. recovery unless the government takes decisive action.","rel":"","context":"In "Campus & Community"","block_context":{"text":"Campus & Community","link":"https:\/\/news.harvard.edu\/gazette\/section\/campus-community\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":78005,"url":"https:\/\/news.harvard.edu\/gazette\/story\/2011\/04\/high-financier-the-lives-and-time-of-siegmund-warburg\/","url_meta":{"origin":257850,"position":2},"title":"High Financier: The Lives and Time of Siegmund Warburg","author":"harvardgazette","date":"April 12, 2011","format":false,"excerpt":"This biography by Niall Ferguson, Laurence A. Tisch Professor of History and Professor of Business Administration, chronicles the life of Siegmund Warburg, a financial wiz, prophet of globalization, and strategic businessman.","rel":"","context":"In "Arts & Culture"","block_context":{"text":"Arts & Culture","link":"https:\/\/news.harvard.edu\/gazette\/section\/arts-humanities\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":68661,"url":"https:\/\/news.harvard.edu\/gazette\/story\/2010\/12\/the-shock-of-the-global-the-1970s-in-perspective\/","url_meta":{"origin":257850,"position":3},"title":"The Shock of the Global: The 1970s in Perspective","author":"harvardgazette","date":"December 16, 2010","format":false,"excerpt":"Disco, drugs, and decadence? Not that 1970s. This book, by Harvard mainstays Niall Ferguson, Charles Maier, and Erez Manela focuses on the decade that introduced the world to the phenomenon of \u201cglobalization,\u201d as networks of interdependence bound peoples and societies in new and original ways.","rel":"","context":"In "Arts & Culture"","block_context":{"text":"Arts & Culture","link":"https:\/\/news.harvard.edu\/gazette\/section\/arts-humanities\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":100531,"url":"https:\/\/news.harvard.edu\/gazette\/story\/2012\/02\/the-west-plagued-by-self-doubt\/","url_meta":{"origin":257850,"position":4},"title":"The West, plagued by self-doubt","author":"harvardgazette","date":"February 1, 2012","format":false,"excerpt":"In his new book, noted historian Niall Ferguson sees Europe and America as facing a profound crisis of confidence in what the future holds.","rel":"","context":"In "Arts & Culture"","block_context":{"text":"Arts & Culture","link":"https:\/\/news.harvard.edu\/gazette\/section\/arts-humanities\/"},"img":{"alt_text":"","src":"https:\/\/news.harvard.edu\/wp-content\/uploads\/2012\/01\/012312_ferguson_033_605.jpg?resize=350%2C200","width":350,"height":200,"srcset":"https:\/\/news.harvard.edu\/wp-content\/uploads\/2012\/01\/012312_ferguson_033_605.jpg?resize=350%2C200 1x, https:\/\/news.harvard.edu\/wp-content\/uploads\/2012\/01\/012312_ferguson_033_605.jpg?resize=525%2C300 1.5x"},"classes":[]},{"id":146402,"url":"https:\/\/news.harvard.edu\/gazette\/story\/2013\/09\/volatile-syria\/","url_meta":{"origin":257850,"position":5},"title":"Volatile Syria","author":"harvardgazette","date":"September 12, 2013","format":false,"excerpt":"Moderator Graham Allison went straight to the heart of the matter during an Institute of Politics forum on Syria at the Kennedy School, asking the four panelists for a yes or no vote on military force.","rel":"","context":"In "Nation & World"","block_context":{"text":"Nation & World","link":"https:\/\/news.harvard.edu\/gazette\/section\/nation-world\/"},"img":{"alt_text":"","src":"https:\/\/news.harvard.edu\/wp-content\/uploads\/2013\/09\/091313_syria_0368_605.jpg?resize=350%2C200","width":350,"height":200,"srcset":"https:\/\/news.harvard.edu\/wp-content\/uploads\/2013\/09\/091313_syria_0368_605.jpg?resize=350%2C200 1x, https:\/\/news.harvard.edu\/wp-content\/uploads\/2013\/09\/091313_syria_0368_605.jpg?resize=525%2C300 1.5x"},"classes":[]}],"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/news.harvard.edu\/gazette\/wp-json\/wp\/v2\/posts\/257850","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/news.harvard.edu\/gazette\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/news.harvard.edu\/gazette\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/news.harvard.edu\/gazette\/wp-json\/wp\/v2\/users\/122429419"}],"replies":[{"embeddable":true,"href":"https:\/\/news.harvard.edu\/gazette\/wp-json\/wp\/v2\/comments?post=257850"}],"version-history":[{"count":6,"href":"https:\/\/news.harvard.edu\/gazette\/wp-json\/wp\/v2\/posts\/257850\/revisions"}],"predecessor-version":[{"id":257859,"href":"https:\/\/news.harvard.edu\/gazette\/wp-json\/wp\/v2\/posts\/257850\/revisions\/257859"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/news.harvard.edu\/gazette\/wp-json\/wp\/v2\/media\/257852"}],"wp:attachment":[{"href":"https:\/\/news.harvard.edu\/gazette\/wp-json\/wp\/v2\/media?parent=257850"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/news.harvard.edu\/gazette\/wp-json\/wp\/v2\/categories?post=257850"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/news.harvard.edu\/gazette\/wp-json\/wp\/v2\/tags?post=257850"},{"taxonomy":"format","embeddable":true,"href":"https:\/\/news.harvard.edu\/gazette\/wp-json\/wp\/v2\/gazette-formats?post=257850"},{"taxonomy":"series","embeddable":true,"href":"https:\/\/news.harvard.edu\/gazette\/wp-json\/wp\/v2\/series?post=257850"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}