Fallout from the debt-ceiling debates and subsequent downgrading of America's credit rating has raised uncertainty in the markets to heights not seen since 2008. To this point, the focus has been primarily on what actions the U.S. will take right the ship. How does this situation affect other global powers? Professors Niall Ferguson and Robert Pozen offer their perspectives on how other nations are viewing and acting upon the turmoil in the U.S.
Niall Ferguson, William Ziegler Professor of Business Administration.
The article originally appeared on www.newsweek.com on August 7, 2011.
Debt Debate: China's View
"Xian, China—viewed from inside the Beltway, the passage of legislation to raise the federal debt ceiling was a triumph for democracy.
"The push and pull Americans saw in Washington these past few weeks...was the will of the people working itself out," declared Mitch McConnell, the Republican leader in the Senate. The appearance of Gabrielle Giffords to vote for the bill raised not just the ceiling but also the roof."
Robert C. Pozen, Senior Lecturer of Business Administration and co-author of The Fund Industry: How Your Money is Managed
This article originally appeared on www.ft.com on August 12, 2011.
Short-selling bans are a mistake
"On Thursday four European countries – France, Italy, Spain and Belgium – announced temporary bans on short selling of specified financial stocks. These bans are mistakes, as shown by the US experience in 2008; they do not prevent declines in financial stocks, but do impose significant costs on capital markets.
Short selling is basically a bet that a stock's price will fall over time. The short seller borrows shares of a company to sell at time #1, and returns them at time #2 when they buy those same shares in the open market – hoping that the stock's price will fall between time #1 and time #2."