‘I used to think that, if there was re-incarnation, I wanted to come back as the President or the Pope … but now I would want to come back as the bond market.’
James Carville (political adviser to Bill Clinton)
The headline of the Times’ business commentary last Thursday confirmed what we had predicted in last Monday's commentary: ‘Bond upheaval trumped Trump’. Alistair Osborne walked through a series of ‘could be’ reasons for America changing track, and he concluded, ‘All of this may have happened. Even so, it's not hard to spot the trigger for his [Trump’s] 90-day breather: the bond market’.
My City career started with running the Gilt Settlement and Money Department at Wedd Durlacher Mordaunt, the market-maker which then handled about 40% of London Stock Exchange turnover. That was where I learned the significance of bond maturity: the length of time before loan stocks have to be repaid. There's a major difference between short-dated bonds, where yields respond to fluctuations in inflation expectations and day-to-day interest rates, and long-dated bonds, where yields reflect the stability and credit-worthiness of Government itself.
At one point last week, the yield on supposedly safe-haven 30-year U.S. Treasury Bonds leapt by 0.24% to top 5% — and that's what cracked Trump's resolve.
But the angst over potential liquidity problems with long-dated U.S. Government Debt is not over yet. The arm-wrestling between the United States and China continues, with tariffs so high that China sees no point in pushing them still higher.
CNN reported on Friday that there were three further measures that China would consider taking in order to break the deadlock: moving their huge purchases of soya beans away from America, stopping all exports of those rare earth materials — and potentially dumping some of their $750 billions of holdings in U.S. Treasury Bonds to drive up long-dated yields still further.
As we predicted last week, the financial stability of the United States is at stake, and it’s China which is now in the position to call the shots. I suspect that crystallising billions of dollars of losses on their holdings of U.S. Bonds might be a more than acceptable price for taking over Taiwan and achieving global hegemony for China. They have built massive military strength over the past twenty years but, if they can achieve that level of dominance over world affairs without resorting to violence, that may be by far the best outcome from their perspective.
It certainly doesn't say much for western democracy, with its major handicap over short-termism.
Hegemony — or Integration through Servant Leadership?
However, as we journey through the Easter week, we would do well to reflect that none of these superpower perspectives pays much attention to the integration of people which lies at the heart of Christian teaching.
If we go back two thousand years, hegemony was then driven by Rome, with its iron grip over Europe, the Middle East and northern Africa. While fully understanding that domination, Jesus introduced a new concept of servant leadership, calling for integration through loving our neighbours, however different they may be to us, and even love for enemies, including praying for those who persecute us. He even demonstrated it by washing his disciples’ feet at the Last Supper.
However, although Christianity is now vibrant and widespread across the world, the superpower leaders still fail to understand what ‘Servant Leadership’ means. It doesn't mean ‘Making America Great Again’ by trying to build a fortress around the United States. It doesn't mean making Russia great again by invading adjoining countries. And it doesn't mean making China great again by flexing its new-found military and commercial muscle.
On Saturday evening, we attended an excellent choral concert in aid of mental health charities, featuring several large amateur choirs and showing clearly the huge benefit of bringing people together in song. With so many people experiencing isolation and insecurity, it’s good to see such a display of inspiration and enjoyment.
The concert ended with the words, ‘Together we can change the world’: a great statement of purpose. The crux of that statement lies in the word ‘Together’, which should point us towards integration and not standing apart from people who are different to us.
This should be central to our celebration of Easter this year, and it explains why the word ‘bond’ needs fresh consideration. Sure, bonds can be things which tie us into a commitment, and the United States would do well to remember that the U.S. dollar’s role as reserve currency is absolutely linked to its reliability for honouring Treasury Bond liabilities.
But bonds are also the result of unconditional love in action, drawing us voluntarily together so that we can change the world for the better.
The English language has a wide variety of polysemantic words (words that express different ideas or contexts), and ‘bond’ is but one example. But perhaps it helps us to remember that, when things look difficult and confrontational, we can always search for another more positive and hopeful interpretation. Re-discovering how to build bonds across humanity is one such example: let’s hope those superpower leaders get that message, which is so central to the Christian faith, as we journey through this Easter week.
Gavin Oldham OBE
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