The United States thinks pretty highly of itself. Some of that bravado is undeserved, but in a few instances we can justifiably claim the W. One way the US is truly exceptional: We're the best place in the world to park money. Full stop. No one else even comes close.
US government bonds are among the most attractive, safe investments in the world, allowing our government to shell out on infrastructure, defense, tech, schools, roads, you name it. Our ability to borrow — and our (so-far) perfect record for paying our bills on time — is our economic superpower, my colleague Christine Romans writes.
In other words: The US debt machine keeps the global economic party bumpin'.
Of course, it's also quintessentially American to make a scene and let our own myopic drama threaten to ruin the party for everyone else.
That is essentially what's happening with the debt ceiling.
If lawmakers don't raise the borrowing limit soon, it won't just be our own citizens who suffer. Treasuries are a haven in times of uncertainty for investors and governments around the world, and demand for them has created a $24 trillion market — the largest by a mile. The US dollar, similarly, dominates global trade, in part because oil and other commodities are priced in dollars.
"The US government issues something the rest of the world desperately wishes it had," wrote Josh Lipsky, the senior director of the Atlantic Council's GeoEconomics Center. "There simply are not enough safe assets available for investors to move off of Treasuries. This is one reason why flirting with a default is so maddening."
Maddening, indeed.
Wall Street appears to be paying attention now, too. Trading had been eerily calm in recent days, but on Tuesday investors appeared more focused on the debt ceiling progress, or rather lack of progress, which sparked an afternoon selloff that sent the Dow down more than 200 points.
RELATED: How you can prepare yourself for a debt default, apart from crying and screaming into the void.
Comments
Post a Comment