NEW YORK - July 12, 2010 - Ignore the uber-low yields on U.S. government debt. It's only a matter of time before markets lose confidence in the U.S. government, argues Harvard professor Niall Ferguson.

“Right now Washington is benefiting from global worries, such as those being seen in Europe, but that won't last for long. If you want to look for a pivotal moment, watch for when debt interest payments begin to eclipse defense payments. In fact, this will happen inevitably, even if there's no imminent spike in Treasury yields. It's inevitable, until and unless, lawmakers show the political will to put the country on a ‘credible path’ of fiscal responsibility,” says Ferguson.

But beyond the fiscal crisis, Ferguson is particularly dismayed at the actions of Ben Bernanke, who once seemed to genuinely get the dangers of deflation. Yet right now Bernanke is doing nothing, even in the face of deflation and a contraction of the money supply. This represents a grave danger, and it's shocking that Bernanke hasn't already re-begun more aggressive quantitative easing.