by Doug Casey
International Man
International Man: In your view, what role does the Treasury market play in global finance, and how significant is it to the current financial system?
Doug Casey: It’s only important because it exists—but it shouldn’t exist. People think that the Treasury market is part of the cosmic firmament, but there once was a time when the US government had little or no debt outstanding, and the world got by fine without it.
It’s not a question of how significant it is so much as when the time bomb that it represents will go off. That’s because it’s not supported by any underlying assets. Nor is the dollar that it’s denominated in.
Let me use a simple analogy. It’s much as if a king is taxing a farmer. But one year, the king is in a war and needs extra taxes. So he tells the farmer, “Look, I need your seed corn this year to fight the war, but I’ll give you a bond which guarantees that you’ll get it back next year, when you need it. Plus interest.”