From Ezra Klein’s Wonkblog today:
Banks are dumping T-bills. “With Washington’s fiscal standoff still unresolved, large financial firms have been unloading investments once considered pristine, suggesting a wild week ahead for markets. Banks are dumping short-term government debt, usually one of the most plain-vanilla investments available, amid fears that Congress and the White House won’t reach an agreement by Thursday to raise the debt ceiling…Senior Treasury officials convened by phone Sunday afternoon to discuss the evolving market conditions, an agency official said…The Securities and Exchange Commission is monitoring bank capital levels and the amount of short-term Treasurys held by financial firms, among other things.” Damian Paletta and Dan Strumpf in The Wall Street Journal.
World should ‘de-Americanise’, says China following default fears. “In China, Xinhua, the official government news agency, said that as American politicians continued to flounder over a deal to break the impasse, “it is perhaps a good time for the befuddled world to start considering building a de-Americanised world”…Xinhua attacked America’s pre-eminent position in the world, adding that “such alarming days when the destinies of others are in the hands of a hypocritical nation have to be terminated”.” Philip Sherwell and Malcolm Moore in The Telegraph (UK).
The US would be the first major Western sovereign default since 1933 Germany. “Reneging on its debt obligations would make the U.S. the first major Western government to default since Nazi Germany 80 years ago. Germany unilaterally ceased payments on long-term borrowings on May 6, 1933, three months after Adolf Hitler was installed as Chancellor. The default helped cement Hitler’s power base following years of political instability as the Weimar Republic struggled with its crushing debts. “These are generally catastrophic economic events,” said Professor Eugene N. White, an economics historian at Rutgers University in New Brunswick, New Jersey. “There is no happy ending.”” John Glover in Bloomberg.