US Treasuries
Over here, rather inconclusively, I've been arguing whether the US would be able to renege on its public debt (US Treasuries) held by China in the event of a war between the two countries. I'm not sure how practical it is, as in whether the Treasury knows which bonds are held by China (although it must know where to send the coupon payments) and of course what the impact would be on the reputation of Treasuries as a safe asset.There must have been something similar, if one a much smaller scale (gold was stil the reserve asset of choice) during World War II, but I can't find anything on the internet about it. I've just bought a book about the Nazi economy in WWII so maybe that will mention it.
You can get too bogged down in financialmarketism here, and forget the basic problem, which is the US Treasury would be paying large amounts of money (if it's 5% p.a on $500bn that's $2bn a month) to a country it was fighting a war against. I can't see how that would be allowed to happen.
posted by Matthew @ 8/09/2007 02:01:00 PM
Comments: 3
