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| Tyson: Greenspan was too sanguine |
The US spends and the rest of the world lends. But the US is spending too much, and if Asian central banks don't keep lending, this year could bring unprecedented risk for bond investors. That was the message from Laura D'Andrea Tyson, former chairman of US president Bill Clinton's Council of Economic Advisors, in her keynote address to the 10th Euromoney Bond Investors Congress in London on February 24.
Tyson argues that the US government's fiscal policy has enhanced the risks to the global economy.
"The global accumulation of US dollar assets could be described as the most generous aid programme in history," she says. "The Asian financial community has helped the US avoid the ?guns and butter' dilemma of financing a war." Foreign official buyers soaked up 40% of net US treasury note and bond issuance last year.
This has sustained a US recovery based on tax cuts and low interest rates rather than on rising employment. So if the central banks lose their appetite for US treasuries, foreign private investors must fill the gap by buying US equities.