Tags: Niall | Ferguson | US | budget

Ferguson: U.S. Will Never Again Have Balanced Budget

Wednesday, 17 Feb 2010 08:29 AM

The U.S., says economist Niall Ferguson, is about as safe a harbor as was Pearl Harbor in 1941.

"Even according to the White House's new budget projections, the gross federal debt in public hands will exceed 100 per cent of GDP in just two years' time," Ferguson recently wrote in the FInancial Times.

"This year, like last year, the federal deficit will be around 10 per cent of GDP. The long-run projections of the Congressional Budget Office suggest that the US will never again run a balanced budget."

"That's right, never."

(The current Greek crisis) “is a fiscal crisis of the western world,” Ferguson notes.

“Its ramifications are far more profound than most investors currently appreciate.”

“The idiosyncrasies of the eurozone should not distract us from the general nature of the fiscal crisis that is now afflicting most western economies," he says.

"Call it the fractal geometry of debt: the problem is essentially the same from Iceland to Ireland to Britain to the U.S. It just comes in widely differing sizes.”

For the U.S., the day of reckoning still seems reassuringly remote, Ferguson observes.

“The worse things get in the eurozone, the more the U.S. dollar rallies as nervous investors park their cash in the ‘safe haven’ of American government debt,” an effect that may persist for some months, just as the dollar and Treasuries rallied in the depths of the banking panic in late 2008, Ferguson says.

Treasury Secretary Timothy Geithner said the country’s debt rating is not at risk because of the trillions of dollars of government spending to shore up the economy, Seeking Alpha reports.

Asked recently on ABC’s “This Week” Sunday whether the government would lose its triple AAA sovereign debt rating, Geithner said, “Absolutely not and that will never happen to this country.”

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The U.S., says economist Niall Ferguson, is about as safe a harbor as was Pearl Harbor in 1941. Even according to the White House's new budget projections, the gross federal debt in public hands will exceed 100 per cent of GDP in just two years' time, Ferguson recently...
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2010-29-17
 

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