Читать книгу Financial Cold War. A View of Sino-US Relations from the Financial Markets онлайн

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Ironically, however, the huge amount of US Treasuries outstanding has enhanced the perception about their safety. In times of market turbulence, investors flock to US Treasuries because they are the most liquid asset class and are, in fact, safer than holding cash in the bank. In the US, the Federal Deposit Insurance Corporation (FDIC), created in 1933 to protect depositors against bank failures, insures deposit amounts up to $250,000 per depositor per insured bank.ssss1 For individuals or institutions with larger holdings, US Treasuries provide greater security because the US government is less likely to default than a bank. International regulations, such as the BIS’s Basel III rules that govern the capital and liquidity requirements of the global banking sector, have further enhanced the demand from major financial institutions by designating US Treasuries as ‘risk free’ for the purpose of calculating banks’ capital needs.

The massive structural demand for US Treasury securities has given the US government almost unconstrained ability to borrow from international capital markets. As discussed further in ssss1, however, this capacity is a double-edged sword. The lack of constraints on public spending has contributed to poor prioritisation and overspending. On the international stage, overextension of US policy has led to conflict, while the scale of US borrowings from other countries has led to an accumulation of implicit and explicit international obligations. The demand for US Treasuries has also helped magnify demand for other private US securities and prop up the value of the dollar. This mispricing of capital has, over time, fundamentally impacted the allocation of resources both between the US and other countries, and within the US itself. As imbalances persisted, financial bubbles would inflate and periodically burst with dramatic social and political consequences.