On Friday in Davos, I interviewed Harvard professor Niall Ferguson, who has been very vocal in recent years about how the world is careening down an unsustainable path.
Unless countries get control of their ballooning debts, Ferguson has argued, we will be headed for crisis after crisis. And Ferguson remains convinced that Europe is on the edge of disaster.
But Professor Ferguson’s take on the United States has changed notably over the past year. He still thinks the U.S. budget deficit is unsustainable and that our entitlement programs will ultimately have to be cut. But he has changed his mind about the U.S.’s ability to sustain its huge debt load.
In one key way, Professor Ferguson now concedes, his adversary Paul Krugman has been right: The U.S. can carry a much-higher debt-to-GDP ratio than he thought. In fact, Ferguson now says, even his Harvard colleague Ken Rogoff, who wrote a seminal book about debt crisis called This Time It’s Different, may be too pessimistic about the United States.
But Europe, Professor Ferguson says, is still screwed.
