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Thursday, October 21, 2004

Don't Cry for Me, Argentina
Posted by Jill | 3:44 PM
Via diarist Msaroff at Kos:

NEW YORK — On Sept. 9, as it must frequently do, the U.S. government turned to Wall Street to raise a little cash, and Paul Calvetti bet that demand for $9 billion worth of long-term Treasury bonds would be “huge.”

But at 1 p.m., as the auction opened and the numbers began streaming across his flat-panel screens, the head of Treasury trading at Barclays Capital Inc. slumped in his chair. Foreign investors, who had been voraciously buying Treasury bonds, failed to show up. Bond prices cascaded downward, interest rates rose, and in five minutes, Calvetti, 38, who makes money by bidding on bonds at one price and hoping market demand lets him quickly resell them at a profit, had lost $1.5 million.

“It’s amazing,” he gasped, after the Treasury Department announced that Wall Street traders, not foreigners, had been left to buy virtually the entire auction. “I don’t think I’ve ever seen this before.”

The most recent auction of 10-year Treasury notes may have been a fluke, a momentary downturn in one aspect of the massive world market for U.S. government and private-sector bonds, stocks and other securities — a market so large and diverse that it has long been the world’s safe haven. But a rash of new data, including Treasury Department figures released Monday showing a net sell-off by foreigners of U.S. bonds in August, has stoked debate over whether overseas investors — private individuals, institutions and government central banks — are growingly dangerously bearish on the U.S. economy.

It is a portentous issue. Foreign governments and individuals hold about half of the $3.7 trillion in outstanding U.S. Treasury bonds, for example, and the government has been heavily dependent on continued overseas bond purchases to finance the roughly $1 billion a day it has to borrow to pay its bills. Foreign lending and investment are also needed to finance the country’s roughly $50 billion monthly trade deficit, while foreign capital has been a key prop to U.S. stock prices.

A turn in overseas attitudes toward the United States could ripple deeply through the economy, depressing the market, raising interest rates and pushing down the value of the dollar.


Bush can think he can create his own reality all he wants, those of us in the reality-based community know that when you a) alienate the rest of the world; and b) run a country's economy into the ground; no one wants to invest in your future. And that's what seems to be happening now.

Do we really want to have to depend on the kindness of strangers? Do we really want our economic well-being to depend on the governments of other countries? Elect Bush for 4 more years, and we will be Argentina by 2008. Complete with junta-style dictatorship.
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