Niall Ferguson (R)

August 31, 2012

The Decline of U.S. Financial Dominance

We believe in having a long term perspective on WEALTHTRACK and helping our viewers and ourselves build financial security to last a lifetime. But sometimes it is necessary to step back even further and think beyond a lifetime, in terms of centuries, to really grasp the era we are living in. That is what we are doing this week as we revisit a timeless interview from last year with British historian Niall Ferguson. According to Ferguson, we are living through one of those seismic epochal shifts that require rethinking the old rules, including our investment ones.

Ferguson is one of those rare individuals who has the intellectual and educational fire power to tackle such a broad sweep of history. And as you will see in a moment, he also has the gift of gab to bring it alive. A professor of history at Harvard, Senior Research Fellow at Oxford and a Senior Fellow at the Hoover Institution at Stanford University, Ferguson is the author of numerous articles and columns, a recent one became the cover story of Newsweek.  He has also authored several books, including The Ascent Of Money and more recently Civilization: Civilization: The West and the Rest
. Both were turned into PBS specials.

Over the past 500 plus years, the West- Europe and later the United States- came to dominate the world stage, economically, politically and militarily. As these charts illustrate, as of 1500, the so called motherlands of Europe- Austria, Belgium, France, Germany, Italy, Netherlands, Portugal, Spain, Russia and the United Kingdom – had a mere 10% of the world’s territory, only 16% of the world’s population, but even then  contributed 43% of world GDP.  By 1913, the dominance of the west was overwhelming. The motherlands, which now included the United States, had expanded their economic and political might to 58% of the globe’s territory, 57% of its population, and a stunning 79% of the world’s economic output, or GDP.

Fast forward to today and you will see how much that is changing. According to the IMF, the contribution of the U.S. and the Eurozone as a share of world GDP has been declining- remember it was nearly 80% in 1913- to less than 45% currently and falling, while the contribution of China is soaring- China recently passed japan as the world’s second largest economy- and India’s share is slowly rising.

Is this shift inevitable and unstoppable? What does it mean for us as investors? I asked Ferguson to start from the beginning- how the west achieved its position of dominance in the first place.

Read More

WEALTHTRACK Episode #910; This program was originally broadcast on August 31, 2012.

Listen to the audio only version here:
Niall Ferguson (R) #910

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Guest Info

Niall Ferguson
Financial Historian
Author, Civilization: The West and the Rest

Newsletter

Consuelo MackThe WEALTHTRACK team is on vacation this week, enjoying the last days of summer before facing the market, economic and election season realities of the fall.

This week’s guest never seems to rest. He is British historian Niall Ferguson– Harvard professor, Senior Fellow at the Hoover Institution at Stanford, author of numerous books including his recently published, Civilization: The West and the Rest, which examines the last 500 years of Western global dominance and why it is in the process of being eclipsed by the emerging powers of the East, China in particular. Ferguson is also a vocal critic of the Obama administration’s economic policies. His recent Newsweek cover story “HIT THE ROAD, BARACK: Why We Need a New President” explains why. It certainly provides food for thought, as Ferguson always does!

If you have not seen this interview before on WEALTHTRACK, it is worth seeing to put current global economic and financial developments in perspective. I hope you learn as much from it as I did.

Have a wonderful Labor Day weekend and make the week ahead a profitable and productive one.

Best regards,

Consuelo

Action Point

n/a

One Investment

Ferguson: Commodity Caution

Short Commodities

“I think my trade right now is short commodities. And I wouldn’t say that was a trade for a four-year time horizon. But in the short run, I would not want to be in the wrong side of a real shift in the commodity market. So that is the trade that I would put on today, this year.”
– Niall Ferguson

Transcript

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Archive

#805- 07/29/11
Niall Ferguson has some novel solutions for two of America’s biggest problems, the failure of public education and record breaking federal debt. His solutions include a scene straight out of “The Good, the Bad and the Ugly!”

524 | 12-11-09
On this week’s Consuelo Mack WEALTHTRACK, the lessons of history. Best selling author and historian Niall Ferguson tells Consuelo what the seismic global economic and market shifts of recent years mean for our future, particularly the longer term implications of America’s exploding debt.

332 | 02-08-08
Star investor Mohamed El-Erian recently left his post as head of Harvard’s endowment and returned to Bond powerhouse Pimco as co-Chief Investment Officer. We’ll talk to him about the global turmoil in the financial markets. He’ll be joined by Harvard Historian Niall Ferguson who has written extensively about the U.S. role in the world economy and top-rated investment strategist Jason Trennert.

 


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