Sunday, 15 March 2009

"There’s no safer investment in the world than in the United States"

There is an old adage of 19th-century British financier and journalist Walter Bagehot which has been cited by a number of commentators during the ongoing financial crisis:

“Every banker knows that if he has to prove that he is worthy of credit, however good may be his arguments, in fact his credit is gone.”

Does something similar also apply to statements of re-assurance from the US Administration about the safety of its sovereign credits?

According to a report from Bloomberg entitled Obama Administration Tries to Reassure China on Treasury Debt

“There’s no safer investment in the world than in the United States,” White House Press Secretary Robert Gibbs said yesterday at a briefing in Washington.

Gibbs was responding to comments from Chinese Premeir Wen that China, the U.S. government’s largest creditor, is “worried” about its holdings of Treasuries and wants assurances that the investment is safe. “I request the U.S. to maintain its good credit, to honor its promises and to guarantee the safety of China’s assets,” Wen said at a press briefing in Beijing.

Maybe it's cruel to mention this but I cast my mind back more than 30 years and remember the famous comment during the Watergate affair from Richard Nixon, before he resigned - "I am not a crook."

The fact that a US president in office even had to say such a thing was enough for one to know that there was something desperately wrong.

The fact that the US Administration has to be addressing the safety of investing in US backed securities should make one just a little uneasy.

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