Crashed: How a Decade of Financial Crises Changed the World

by Adam Tooze

House insistence on a $1.2 trillion increase in taxes.68 Journalists began compiling calendars as to which bills due in August the American government should pay first. Constitutional specialists were debating the pros and cons of executive prerogative, or coining trillion-dollar platinum coins with which to repay the national debt.69 If Greece was a problem, and Italy was too big to fail, there was simply no reckoning what a US default might do. In August alone, the Treasury had to roll over almost $500 billion in debt.70 With the eurozone wobbling, the American money market funds that were pulling out of European bank bonds continued to shift into US Treasurys. But appearances were deceptive. Investor demand for US government debt held up, but above all in lower-risk, short maturities. The average maturity of US Treasurys held by the MMFs declined from ninety-five days in January 2010 to only seventy days at the end of July 2011.71 Meanwhile, financial engineers began to contemplate the need for something no one had contemplated before—credit default swaps against US Treasurys.