Sunday, March 9, 2014
The Threat of Dumping Bonds
When the British, French, and Israelis attacked in the 1957 Suez Crisis, America was able to put financial pressure on Britain. It held many British bonds and threatened to start selling them if the British did not stop the attack. From the Wikipedia article:
"Britain's then Chancellor of the Exchequer, Harold Macmillan, advised his Prime Minister Anthony Eden that the United States was fully prepared to carry out this threat. He also warned his Prime Minister that Britain's foreign exchange reserves simply could not sustain a devaluation of the pound that would come after the United States' actions; and that within weeks of such a move, the country would be unable to import the food and energy supplies needed simply to sustain the population on the islands."
Some say this marked the end of the British imperial power and the start of America as a "superpower".
Now Russia is threatening to dump US bonds if the US imposes sanctions on Russia for Crimea.