We haven’t heard much from Niall Ferguson lately, but he’s back, and warning of the folly of a second stimulus.
“The risk is that at some point your fiscal policy loses credibility in the eyes of investors,” Ferguson said at the World Knowledge Forum in Seoul. “Then, very quickly, you will find yourself in a debt spiral of rising rates, widening deficits, crumbling credibility and yet more rising rates.”
The question of course for Ferguson is: Why, given the knowledge of our apparently untenable debt situation, hasn’t this happened already? Why can’t the market see this right now? And why would that one extra stimulus be the one that tips us over the edge?