Last Updated Sep 23, 2008 1:57 PM EDT
In short, Ferguson suggests that even as US lawmakers mull a $700 billion government-backed shoring up of the financial sector, there are six more shocks potentially coming to the economic system. The result? Forget recession -- that's a given. The question is, can we avoid a depression?
Here are some potential events on the horizon that could make today's situation worse, according to Ferguson:
- The possibility of more bank deaths, especially if the government plan is held up in debate.
- Credit default swaps market could seize up.
- Unaffected parts of the financial industry could still yet get sideswiped. To wit, "There are hundreds of billions of dollars in losses looming on corporate debt â€" almost as much as has already been lost on mortgage-backed securities," Ferguson writes.
- A likely US recession, beginning in the fourth quarter and continuing into 2009. Oh, and the dollar is probably going to weaken again, Ferguson says.
- The economic slowdown could become a global phenomenon, leading to violent financial reactions in emerging markets such as Russia.
- The presidential election will continue to unleash harsh rhetoric about the economy, further undermining investor confidence.
"There has certainly been a 1930s feel to this month's events," says Ferguson. "The nationalisation â€" or 'conservatorship' â€" of Fannie Mae and Freddie Mac (the former a creation of the Depression era), the bankruptcy of Lehman Brothers (which traces its history back even further), the takeover by Bank of America of Merrill Lynch and the US government rescue of AIG, the country's largest insurer: a single one of these would have constituted a big financial crisis in the 1980s or 1990s."He also says the fact that the US has gone 80 years without a depression "is in itself remarkable."
You may have seen Ferguson recently on the PBS documentary The War of the World: A New History of the 20th Century, which he wrote and narrated.