by Jules Evans | Feb 10, 2009 | Economics and development
Goldman Sachs estimates the US government will issue US$2.5 trillion in debt this year, way up on the US$850 million it issued last year. That’s partly because of president Obama’s US$800 million bail-out package.
But Treasuries investors are balking at buying up all this debt, and Treasuries prices are hitting record levels, particularly in the long-end of the market, of five years or over, where investors are worried about the long-term risk of inflation.
The US is now rated as more risky than France in the credit default swaps market.
Some analysts are comparing the situation to the 90s, when so-called ‘bond vigilantes’ forced Bill Clinton to abandon his plans to increase government spending by pushing Treasuries prices up.
The vigilantes, in that case, were trying to get the Federal Reserve to participate as well. That, apparently, it was is happening here too – the bond markets want the Fed to bail out the bail out, by buying up new long-term US Treasuries.
The biggest holders of US Treasuries, at the moment, are not US dealers, but emerging market central banks and sovereign wealth funds, particularly China and Saudi Arabia.
But US Treasuries investors say these players are unlikely to buy more Treasuries debt:
“To the extent that the Chinese and others do not have the necessary funds, someone has to buy them,” Bill Gross [head of Pimco bond fund] said in an interview with Bloomberg Television. “It is incumbent upon the Fed to step in. If they do, that will be a significant day in the bond market and the credit markets.”
Personally, it sounds to me like US bond investors are trying to get a boost on their US Treasuries holdings by forcing the Fed to come into the market.
Pimco, which is the biggest private bond fund in the world, pulled this trick before – it bought up Fannie and Freddie debt, then made a big noise about how the US government had to bail them out immediately, otherwise it would be cataclysmic for the bond markets. The government duly did, and Pimco made a killing.
by Daniel Korski | Feb 10, 2009 | Conflict and security, Cooperation and coherence, UK
For many years, the US has influenced UK national security thinking and vice versa. The 1947 National Security Act, pushed through by Harry Truman, was in many ways an attempt at copying the British system of government, which US policy-makers and commanders had come to admire during the years of close US-UK collaboration during WWII.
Later on, the influence tended to move the other way. The 1986 Goldwater-Nicols Act, which put the “joint” into the Pentagon, had as profound an effect on UK military organisation as the general staff system originally employed in Napoleon’s Grande Armée.
But whereas previously the ideas were studied and adapted to the UK’s constitutional set-up, today it seems anything invented in the US should be imported wholesale to the UK, regardless of whether it fits the political, legal and constitutional set-up or not.
So Richard Holbroke’s appointment as President Obama’s Special Representative for Afghanistan and Pakistan has now been matched by the choice of Sherard Cowper-Coles as the Foreign Secretary’s Envoy to Afghanistan and Pakistan. This adds to Jack McConnell’s role as Special Envoy for Conflict Resolution and what is rumoured to be Des Browne’s imminent appointment as the Prime Minster’s envoy to Sri Lanka. (more…)
by Alex Evans | Feb 10, 2009 | What we're watching
[youtube]http://www.youtube.com/watch?v=nzHAkhStvHs[/youtube]
by Alex Evans | Feb 10, 2009 | Cooperation and coherence
60 Minutes had the first interview with the crew of the US Airways flight that crash landed in the Hudson over the weekend, including accounts of the crash from the pilot and from the entire crew.
Amanda Ripley has some good commentary over on her blog, noting how much of Sully’s account echoes themes set out in her book The Unthinkable, which was a book of the year for most of us at Global Dashboard.
As she observes, Sully’s first reaction was disbelief – “‘I can’t believe this is happening. This doesn’t happen to me.’… I had this expectation that my career would be one in which I wouldn’t crash an airplane.” – a classic reaction to disaster, and much more common than panic or hysteria. Ripley also quotes Sully’s description of the crew’s reaction to his announcement that the plane would be going down:
I made the brace for impact announcement in the cabin, and immediately, through the hardened cockpit door, I heard the flight attendants begin shouting their commands in response to my command to brace: heads down, stay down, I could hear them clearly and they were chanting it in unison over and over again to warn them, to instruct them, and I felt very comforted by that. I knew immediately that they were on the same page. That if I could land the airplane, that they could get them out safely.
That these commands were shouted was crucial to overcome the passengers’ own disbelief – as two of the cabin crew note, some of the passengers were looking out of the window rather than bracing, while others were making calls on their cellphones.
The whole thing’s worth watching – including 60 Minutes’ footage of the reunion between the crew and the passengers if you want to get all misted up.
