How Yellen might differ from Bernanke: Ferguson

Kerima Greene, Senior Talent Producer, "Power Lunch"
Desperate improvisation going on in Fed: Niall Ferguson

Some of the world's top investors and policymakers gathered a ranch in LaRue, Texas, on Wednesday for the annual Barefoot Economic Summit, in hopes of tackling the macro forces that are moving the markets, including everything from monetary policy to the woman who is nominated to head the Federal Reserve: Janet Yellen

Prominent Harvard professor Niall Ferguson, author of "The Great Degeneration: How Institutions Decay and Economies Die" shared his insight in an interview with CNBC.

Yellen as Fed chair

As to how Janet Yellen would differ from Ben Bernanke, Ferguson said she is "theoretically on the same page as Bernanke, but covertly, she would really like to have a nominal GDP target—a new level of policy innovation on the monetary side."

(Read more: More yelling over Yellen? The coming battle royale)

But the problem remains finding a majority support within the FOMC.

"Can she get the members on board? That's a big question mark. And I doubt that even a handful of FOMC members share her radicalism."

Down the road, Ferguson thinks we will have lower rates for longer than if Larry Summers got the job of Fed chief.

"But when the adjustment comes, in 2016, 2017, it will be very sudden and sharp. One of the sharpest adjustments in short rates we've ever encountered," he said.

Harvard historian Niall Ferguson
Matt Carr | Getty Images

Tale of two policies

"On the fiscal side, we have these unsustainable levels of private and public debt. A CBO recent projection showed just how bad the debt scenario is and our debt mountain is only growing. That of course, is partially based on the low-growth era we are now in, this new era of low growth we are all still getting used to. And it is hard to see a way out of that. How do you stabilize the long term fiscal position and prevent debt accumulation from continuing?" Ferguson said.

(Read more: Fed battled overending bond buying: Minutes)

What's more troubling, Ferguson said, is that we are running out of options on monetary policy. "There is, I believe, a desperate improvisation going on inside the Fed as QE entered the period of diminishing returns. To the point, the idea of sacrificing something somewhat effective, the forward guidance, at the altar of QE to maintain it, with no taper at all."

Shutdown showdown

In a Wall Street Journal op-ed last week, Ferguson called the government shutdown a sideshow, but he thinks the debt is the real threat.

"It should now be clear that what we are watching in Washington is not a comedy but a game of Russian roulette with the federal government's creditworthiness ... only a fantasist can seriously believe 'this is not a crisis,'" he wrote.

—By CNBC's Kerima Greene. Follow her on Twitter @KerimaGreene