An "Oh Sh*T" Moment or Three!

I was moved to title this post with an asterisk censored exclamation borrowed from the title of a recent post by Niall Ferguson, Author and Professor of History at Harvard University. Ferguson pulls no punches in a hard hitting essay that traces the decline of civilizations to a sudden drop off a cliff than a slow gradual decline over centuries. He explains the decline in these terms.

In my view, civilizations don’t rise, fall, and then gently decline, as inevitably and predictably as the four seasons or the seven ages of man. History isn’t one smooth, parabolic curve after another. Its shape is more like an exponentially steepening slope that quite suddenly drops off like a cliff.

If you don’t know what I mean, pay a visit to Machu Picchu, the lost city of the Incas. In 1530 the Incas were the masters of all they surveyed from the heights of the Peruvian Andes. Within less than a decade, foreign invaders with horses, gunpowder, and lethal diseases had smashed their empire to smithereens. Today tourists gawp at the ruins that remain.

Note these examples of how the great civilizations of the past ended their running with the bulls.

The Roman Empire didn’t decline and fall sedately, as historians used to claim. It collapsed within a few decades in the early fifth century, tipped over the edge of chaos by barbarian invaders and internal divisions...

The Ming dynasty’s rule in China also fell apart with extraordinary speed in the mid–17th century, succumbing to internal strife and external invasion. Again, the transition from equipoise to anarchy took little more than a decade.

A more recent and familiar example of precipitous decline is, of course, the collapse of the Soviet Union. And, if you still doubt that collapse comes suddenly, just think of how the postcolonial dictatorships of North Africa and the Middle East imploded this year....Here yesterday, gone today.

Ferguson lists five institutional innovations that he dubs "killer applications" that allowed the West to surge ahead of all of the Rest, beginning in 1500.

Western Civilization's Killer Apps

COMPETITION Western societies divided into competing factions, leading to progressive improvements.

THE SCIENTIFIC REVOLUTION Breakthroughs in mathematics, astronomy, physics, chemistry, and biology.

THE RULE OF LAW Representative government based on private-property rights and democratic elections.

MODERN MEDICINE 19th- and 20th-century advances in germ theory, antibiotics, and anesthesia.

THE CONSUMER SOCIETY Leaps in productivity combined with widespread demand for more, better, and cheaper goods.

THE WORK ETHIC Combination of intensive labor with higher savings rates, permitting sustained capital accumulation. 

Ferguson presents troubling statistics to back up his view that we are hurtling like the train above, towards that cliff, and our own "Oh ShiT! moment. He then turns to describe what can be done to "reboot the system" and do, what he says Americans have always done;  kick start our instinctive loyalty to those "killer applications" of Western ascendancy.

Read More: America's Oh Sh*T Moment

Now if you want a couple of more possible "Oh Sh*T" moments to wake up too; try these possible scenarios. IAEA says foreign expertise has brought Iran to threshold of nuclear capability

And Israel's possible response. Will Israel attack Iran's nuclear capabilities?

Finally, for a real slide down a mile long razor blade into a pool of alcohol is this story from The Atlantic. Read about how Pakistan moves their nukes and our plans for keeping them from ending up in the wrong hands.

Pakistan lies. It hosted Osama bin Laden (knowingly or not). Its government is barely functional. It hates the democracy next door. It is home to both radical jihadists and a large and growing nuclear arsenal (which it fears the U.S. will seize). Its intelligence service sponsors terrorists who attack American troops. With a friend like this, who needs enemies?

The Ally from Hell!

Crystal Balls, Ouija Boards or Fate: Predictions for 2009

Niall Ferguson Historian, Author and esteemed Professor at Harvard and Oxford, created a look back at 2009, as he imagines it to be. Time will be the only judge and fate our time keeper.

Ferguson begins:

It was the year when people finally gave up trying to predict the year ahead. It was the year when every forecast had to be revised – usually downwards – at least three times. It was the year when the paradox of globalisation was laid bare for all to see, if their eyes weren’t tightly shut.

And coins a new title of the current economic crisis.

That was the true significance of the Great Repression which began in August 2007 and reached its nadir in 2009. It was clearly not a Great Depression on the scale of the 1930s, when output in the US declined by as much as a third and unemployment reached 25 per cent. Nor was it merely a Big Recession.

And this about the "great merger."

There was uproar when Timothy Geithner, US Treasury secretary, requested an additional $300bn to provide further equity injections for Citigroup, Bank of America and the seven other big banks, just a week after imposing an agonising “mega-merger” on the automobile industry. In Detroit, the Big Three had become just a Big One, on the formation of CGF (Chrysler-General Motors-Ford; inevitably, the press soon re-christened it “Can’t Get Funding”).

The rest of the world begins to shrink in our rearview mirror.

By the first quarter of 2009, however, the mood in Europe had darkened. It became apparent that the problems of the European banks were just as serious as those of their American counterparts.

This asymmetric character of the global crisis – the fact that the shocks were even bigger on the periphery than at the epicentre – had its disadvantages for the US, to be sure. Any hope that America could depreciate its way out from under its external debt burden faded as 10-year yields and the dollar held firm.

Obama channels Nixon.

The same was true of Obama’s decision to fly to Tehran in June – a decision that did more than anything else to sour relations with Hillary Clinton, whose supporters never quite recovered from the sight of the former presidential candidate shrouded in a veil. Not that the so-called “opening to Iran” produced a dramatic improvement in the Middle East region. Nobody had expected that either. It was more that, like Richard Nixon’s visit to China in 1972, it symbolised a readiness on Obama’s part to rethink the very fundamentals of American grand strategy.

And finally, faint light appears in the waining days of 2009.

By year end, it was possible for the first time to detect – rather than just to hope for – the beginning of the end of the Great Repression. The downward spiral in America’s real estate market and the banking system had finally been halted by radical steps that the administration had initially hesitated to take. At the same time, the far larger economic problems in the rest of the world had given Obama a unique opportunity to reassert American leadership, particularly in Asia and the Middle East.

Read the complete article: An imaginary retrospective of 2009

Blog friend Mark at Zenpundit has this link to a post about the future.

“Socionomic” Futurism at Futurejacked

Related to that post is this byDave Schuler at Outside the Beltway, where Dave takes on one of the more over the top predictions to surface this week, the break up of the United States in 2010.

Breakin’ Up Is Hard to Do

UPDATE: Barnett: Top 10 foreign policy wishes for 2009

Tom Barnett weighs in with his third annual list of what he wishes the United States would do in the arena of foreign policy. It is noteworthy that several of Tom's wishes coincide with several of the predictions made by Niall Ferguson in his imagined look back at 2009.

10. President Obama's speech in New Delhi to the world's Muslims.

Ferguson predicting Obama paying a Nixon-like visit to Terhan, after Ahmadinejad loses.(see #3 wish).

8. America commits to completing -- even expanding -- the Doha Round.

Ferguson sees a deepening economic crisis worldwide that leaves the U.S. dollar the desired currency and in position to lead in expanding free trade.

7. A Securities & Exchange Commission for the global economy.

Ferguson predicted a world wide banking crisis that could lead to Barnett's suggestion coming to bloom.

3. Mahmoud Ahmadinejad loses Iran's 2009 presidential election.

Seems to be on everyone's wish list. Ferguson even suggests that Iran will abandon their Nuclear program after MA's departure, in order to resuscitate their flat-lined economy.

1. The U.S. economy turns the corner.

Fergusons final paragraph above, mirrors this wish.

The problem with predictions is that they can bee destroyed by seeing a "Black Swan", as Nassim Nicholas Taleb's book The Black Swan: The Impact of the Highly Improbable, reveals.

Two Great Christmas Gifts

With Christmas just a couple of weeks away here are two really worthwhile book recommendations that will stimulate your mind and open your eyes to the future, by reviewing the past.

Major kudos to Steve DeAngelis of Enterra Solutions for this post. Steve writes about Niall Ferguson, the Laurence A. Tisch Professor of History at Harvard University and the William Ziegler Professor at Harvard Business School, on the release of his new book, The Ascent of Money: The Financial History of the World.

Steve links a review by Shelby Coffey III in the November 30, 2008 Washington Post, "Markets Don't Make Bubbles, People Do," and makes insightful comments about both the review and Ferguson's book.

A brief excerpt of Steve's post.

People choking in the grasp of the current financial crisis are wondering how we got in this position and what we can do about it. Ferguson's web site provides this synopsis of his new book:

"Bread, cash, dosh, dough, loot: Call it what you like, it matters. To Christians, love of it is the root of all evil. To generals, it’s the sinews of war. To revolutionaries, it’s the chains of labour. But in The Ascent of Money, Niall Ferguson shows that finance is in fact the foundation of human progress. What’s more, he reveals financial history as the essential back-story behind all history. The evolution of credit and debt was as important as any technological innovation in the rise of civilization, from ancient Babylon to the silver mines of Bolivia.

...The importance of Ferguson's book is that it highlights how essential capital flows are for the success of globalization. The only way to bring millions of more people out of poverty is to create wealth. Ferguson's book explains why financial systems are essential in that endeavor.

Coffey's review noted these remarks made by Ferguson on MSNBC.

Ferguson is making the rounds with his new book, saying last week on MSNBC that the United States should follow up the G-20 Economic Summit with a "G-2" meeting with just the Chinese. The professor also winningly confesses that even he is confused about the thrust of Treasury Secretary Henry Paulson's $700 billion rescue fund. Ferguson has, nonetheless, written an admirably illuminating book that will take its place beside such modern classics as John Train's The Money Masters, Peter L. Bernstein's Against the Gods, and Adam Smith's Supermoney.

Ferguson's comments about a summit with China mirror much of what Thomas Barnett has been advocating about locking China in at today's prices.

Read the whole post: Show Me the Money.

Niall Ferguson is one of my favorite authors, writing The War of the World and Colossus: The Rise and Fall of the American Empire among other best sellers. His expertise in economic history, coupled with an amazing ability to be a great storyteller gives him two tools, that make him one of the important scribes of our time. Among his teaching positions he is also a resident faculty member of the Minda de Gunzburg Center for European Studies. He is also a Senior Research Fellow of Jesus College, Oxford University, and a Senior Fellow of the Hoover Institution, Stanford University.

His newly released book The Ascent of Money: A Financial History of the World is described this way on Amazon.

Niall Ferguson follows the money to tell the human story behind the evolution of finance, from its origins in ancient Mesopotamia to the latest upheavals on what he calls Planet Finance.

Through Ferguson’s expert lens familiar historical landmarks appear in a new and sharper financial focus. Suddenly, the civilization of the Renaissance looks very different: a boom in the market for art and architecture made possible when Italian bankers adopted Arabic mathematics. The rise of the Dutch republic is reinterpreted as the triumph of the world’s first modern bond market over insolvent Habsburg absolutism. And the origins of the French Revolution are traced back to a stock market bubble caused by a convicted Scot murderer.

With the clarity and verve for which he is known, Ferguson elucidates key financial institutions and concepts by showing where they came from. What is money? What do banks do? What’s the difference between a stock and a bond? Why buy insurance or real estate? And what exactly does a hedge fund do?

This is history for the present. Ferguson travels to post-Katrina New Orleans to ask why the free market can’t provide adequate protection against catastrophe. He delves into the origins of the subprime mortgage crisis.

Perhaps most important, The Ascent of Money documents how a new financial revolution is propelling the world’s biggest countries, India and China, from poverty to wealth in the space of a single generation—an economic transformation unprecedented in human history.

Based on my previous reading of Ferguson's work I hardily recommend this book to everyone who desires a clear understanding of the current times and how in the end, it is always the money that makes the world go around.

Ferguson's book should be have equal billing on any one's Christmas wish list alongside Thomas Barnett's book, Great Powers: America and the World After Bush to be published in February 2009. Tom recently posted the table of contents on his blog to give readers a road map of where he is going with his vision of grand strategy.

Great Powers Table of Contents and for more Great Powers material.

It is described this way at Amazon.

In civilian and military circles alike, The Pentagon’s New Map became one of the most talked about books of 2004. “A combination of Tom Friedman on globalization and Carl von Clausewitz on war, [it is] the red-hot book among the nation’s admirals and generals,” wrote David Ignatius in The Washington Post. Barnett’s second book, Blueprint for Action, demonstrated how to put the first book’s principles to work. Now, in Great Powers, Barnett delivers his most sweeping— and important—book of all.

In Great Powers, Barnett offers a tour de force analysis of the grand realignments that are both already here and coming up fast in the spheres of economics, diplomacy, defense, technology, security, the environment, and much more. The “great powers” are no longer just the world’s major nation-states but the powerful forces, past, present, and future, moving with us and past us like a freight train. It is not a simple matter of a course correction but of a complete recalibration, and the opportunities it presents are far greater than the perils. Barnett gives us a fundamental understanding of both, showing us not only how the world is now but how it will be.

I will have more on Great Powers in the coming weeks.