Ferguson: West Has Cards Yet to Play Against Russia

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April 29 (Bloomberg) -- Harvard University’s Niall Ferguson analyses the impact of global unrest on markets, offers his critique of President Barack Obama’s foreign policy, explains why the west has the tools to hold off Russia from Ukraine and discusses who he believes is the most dangerous mind in economics from the 2014 Milken Global Conference on Bloomberg Television’s “Market Makers.”

These days?

You have written a book called "rate the generation -- "great degeneration." start with the easy ones.

There are one of two things going on, one of which has to do with the way western economies are grappling with institutional problems that are slowing down recovery.

I think the more active story right now is the geopolitical taper.

I did a piece a couple months ago in the journal saying the problem is not the fed's taper, the white house's taper and the tapering of american foreign policy is having all kinds of consequences around the world, the middle east, eastern europe, but also east asia.

I think we are dealing with the profound crisis of american foreign-policy.

A lack of willingness to engage?

The president was giving himself a baseball like assessment yesterday.

Even he must know it is not going well.

In january, he said in an interview in "the new yorker," i don't need a george kennan right now.

He was the strategist -- it turns out that mr.

Obama did need a george kennan.

He is paying the price of not having a coherent foreign-policy strategy, a point i've been making for quite some time.

What you make of the situation in russia?

Mr.

putin is salvaging a failure.

He lost control of ukraine in the revolution that overthrew viktor yanukovych.

Crimea was a consolation prize.

Now what he is trying to do is by intimidating and disrupting the political process in ukraine, to loosen kiev's control over the country.

What he is trying to do right now is to destabilize the political process so that you end up with such a decentralized ukraine that russia can control it in a way that he controls the whole -- controlled the whole of it after the revolution.

Ariel roubini thinks things will get worse and -- before they get better.

You agree?

On a scale of one to 10, ukraine is at seven and getting higher as far as the chance of what he termed a hot war is.

That would be a very risky option for putin.

The squeeze of economic sanctions in energy and financial sectors has not been put on yet.

I don't think he needs to do more than he is doing.

Disruption, acting as provocateur -- it would be a very risky option for him to mount a full-blown invasion.

I think that would force the germans into backing tougher sanctions.

The u.s., in many ways, is on course to unilaterally ramp up sanctions.

It doesn't have unit -- european support for backing of meaningful sanctions.

It is not enough to stop food and.

-- stop foodputin.

If he crosses the line by sending troops into ukraine, i think the germans will have to accept tougher sanctions.

You criticized the president for failing to recognize the need to at least pay attention to and perhaps anticipate such actions by vladimir putin.

What about the europeans?

They seemed to be just as surprised by the taking of crimea.

I was in crimea in september.

One has to travel the world to learn what is going on.

I don't know how often you been there yourself.

There has been a shift in the public in terms of eu membership.

The sign that was a first step in the direction of du membership.

-- of eu membership.

It fell through in november.

That was the moment when things began to spin out of control.

We shouldn't just focus on ukraine.

More people died in syria yesterday than in ukraine.

The crisis in syria is devastating.

To say nothing of the breakdown in talks between israelis and palestinians.

And east asia -- it is an unconvincing strategy by the u.s. to contain a rising china.

I don't think it is convincing many people in beijing.

I think he may ultimately look back and -- not figuring out china could be this president's biggest mistake.

Can we go back to ukraine for a moment?

Could the sanctions backfire on the european economy?

Yes.

In the sense that if they went further and impose the kind of sanctions that would hit not just one bank but multiple russian banks, it would certainly have your -- have implications for the europeans.

But this is a good time to exert economic rusher on russia -- to exert economic pressure on russia.

Are they strong enough to do that?

The worst estimates right now , maybe a 4% contraction.

Even if the russian economy shrank by 9%, it would still have a very small effect on the core european economy.

There is interdependence here.

It is russia that will feel much more pain than germany.

In that sense, the west still has some real cards to play.

Do they have the guts to play them?

That's an excellent question.

By renouncing the use of military force, i think the president has undermined his own diplomacy.

Sanctions are a powerful weapon but russia is a lot bigger than it ran -- then i ran -- russia is a lot bigger than iran.

There is an institutional malaise, governments are too large and spend too much money.

There are people who disagree with you.

In your opinion, who is the most dangerous economic thinker writing today?

I'm going to be extremely careful about answering that.

You've never been extremely careful to date, why start now?

Are you kidding me?

It is important not to personalized e debate.

The economics profession has a lot to answer for.

There have been flawed models that led us into a financial crisis that hardly any professional economists foresaw.

They tend to think the world is some kind of machine they can model.

That has led us into all kinds of policy errors and wrong diagnoses.

I won't name any in particular who have predicted that policies of fiscal consolidation which they label austerity would result in catastrophe in countries like thomas say, the united kingdom -- like, say, the united kingdom.

Which economy is growing fastest right now?

It is the u.k. there is a focus on the u.k. about austerity, for example, arguments that the eurozone was going to break up, which ought to have made the public more skeptical about economists as a group.

I think we need to recognize this isn't just one economist.

It is economics as a discipline.

It is not just paul krugman.

It is paul krugman and his peers and followers.

There are many who agree with paul krugman and his analysis him of the keynesian -- analysis, the keynesian line.

Larry summers, krugman is not the only keynesian.

The surprising thing is how many people subscribe to these arguments that protect -- create doom and disaster for any countries that try to do fiscal stabilization.

That's why you don't want to single one person out.

Let's turn the question inside out.

Who should we be paying more attention to question mark -- more attention to?

We should pay more attention to people who don't just talk about economics.

The biggest writing force -- you mean people who actually put money at risk.

Very few economists -- i don't think the economists i mentioned have any experience of running businesses or managing money.

My point is a more profound one than that.

To a large extent what is driving economic volatility is not economics.

It is politics.

It is international relations, domestic all addicts.

-- domestic politics.

There are those who see a crisis of foreign policy.

It is a sad indictment of our intellectual world that henry kissinger, aged 91 this year, is still the man writing the most authoritative things on these subjects.

We have to end it there.

Thank you so much.

Awesome.

This text has been automatically generated. It may not be 100% accurate.

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