We need to talk about Bunds

A shortage of safe assets in the eurozone is creating market distortions

Kate Allen

© FT montage; Bloomberg; Dreamstime

We need to talk about Bunds and the risk they pose to eurozone markets. No, I’m not joking.

Germany’s insistence on running a balanced budget and a current account surplus leaves no room for an expansion of its government debt — thus limiting the supply of German bonds, or Bunds, which are the eurozone’s safe asset.

The shortage exacerbates the price effect of European Central Bank bond-buying, widening the spread between German yields and those of riskier assets, such as Italy’s bonds.

The 10-year Bund yield reached the giddy heights of 0.8 per cent last year as investors’ minds turned to the end of quantitative easing and the timing of a rate rise. But it has since slipped to 0.1 per cent, pushing the spread against equivalent Italian bond yields to about 2.9 per cent.

The wider spreads are between ostensibly equal member states. The more volatile they are, and the more investors focus on them as a barometer of political risk, the more political the sovereign debt markets become.

EU budget rules aim to ward off excessive surpluses as much as deficits. They should mitigate against parsimony just as much as they are used against countries such as Italy for profligacy.

It is all very well to castigate Italy for its big debt burden, but not enough attention is paid to what happens when countries are not selling enough debt.

The euro was created “as a means of strengthening the political bonds between [European nations]”, according to the European Commission. Deliberately under-borrowing on your fiscal capacity, leaving the continent’s banks and pension funds with a shortage of safe assets, hardly helps fulfil that ambition.

Germany has in recent years run record budget surpluses and the world’s largest trade surplus, which last year led French president Emmanuel Macron to accuse his neighbour of “fetishising” surpluses.

The shortage of Bunds is arguably one of the drivers of exuberance in areas such as real estate. Investors need to put their money somewhere and there is not enough of what they actually want to buy so they are forced into substitutes which then rapidly become overloaded and suffer price bubbles.

It is rare to hear an argument in favour of increasing a country’s indebtedness, but the evolution of the bloc’s capital markets should also be on Germany’s agenda.

A way around Germany’s budget policies would be to create pan-eurozone debt instruments backed by multiple countries, but Germany is unwilling to tolerate mutualisation of debt. The eurozone already faces democratic challenges in pursuing further integration, so it is hard to blame it for that.

But that constrains the development of Europe’s capital markets because of the safe assets shortage.

Central Banks Cave, Usher In The Crack-Up Boom

by John Rubino


This was going to be the year when the other big central banks joined the Fed in “normalizing” interest rates and reversing the past decade’s QE experiment. Instead, the other central banks blinked and went back to aggressive ease, and the Fed is following them. This is a very big deal.
Let’s consider some before-and-after stories:

In September 2018, the European Central Bank began tightening:

European Central Bank to take next step in tapering stimulus

(AP) – The European Central Bank is expected to ratchet back its stimulus efforts again on Thursday as it gingerly phases out extraordinary support for the economy left over from the Great Recession and the euro currency union’s debt crisis. 
The bank’s 25-member governing council is expected to cut its monthly bond-purchase stimulus to 15 billion euros ($17.4 billion) a month from 30 billion a month, on the way to ending the purchases at the end of the year. 
Reinhard Cluse, chief European economist for UBS, said that after the June meeting “the ECB is now essentially on autopilot.” Cluse said that the ECB can phase out the bond purchases and then decide the exact timing of next year’s first rate increase in the summer or fall.

But before any actual tightening took place, the EU economy slowed and turmoil flared in Italy and France. This week:

European Central Bank announces major policy reversal

(WSWS) – The European Central Bank has reversed its policy of slight monetary tightening and announced a new stimulus package in the face of data which show a sharp downturn in growth in the euro zone. The unanimous decision was taken at the meeting of the ECB’s governing council held in Frankfurt yesterday. 
The decision came just three months after the central bank announced it was phasing out its asset purchasing program. The bank indicated it would keep interest rates at historic lows at least until next year and potentially indefinitely and set out a new program to offer cheap loans to euro zone banks.
It also indicated it would continue to reinvest the proceeds of bonds which mature under its €2.6 trillion quantitative easing program for an “extended period of time” with reinvestments amounting to about €20 billion a month. 
The decision by the ECB came as a result of what president Mario Draghi characterised as a “substantial” downward revision of growth estimates for the region. He said the new outlook for annual growth in gross domestic product was 1.1 percent for 2019, 1.6 percent for 2020 and 1.5 percent in 2021.

In Japan, which has pioneered both negative interest rates and aggressive central bank asset buying, speculation began in 2018 that the Bank of Japan would start raising rates. From a Nikkei/Asia article:
Speculation that the bank would tinker with monetary policy rose when Kuroda mentioned the concept of the “reversal interest rate” in a speech he gave in Zurich in November. 
The “reversal interest rate” refers to the process whereby excessively low interest rates hurt the banking sector, making it harder for banks to act as financial intermediaries. In such a case, the effects of monetary easing could reverse and become contractionary. 
Those comments led market participants to speculate that the BOJ was becoming concerned about overly low interest rates, and that it might be leaning toward tightening sooner than expected.

But the BoJ “quelled” that talk in December:

Bank of Japan’s Kuroda quells talk of monetary tightening 
(Nikkei) – Bank of Japan Gov. Haruhiko Kuroda has moved to quell recent market speculation that the central bank will tighten the monetary taps, saying it will continue its monetary easing measures in light of weak inflation. 
Kuroda’s remarks came as the BOJ concluded its two-day monetary policy meeting on Thursday, during which it decided to maintain its negative interest rate policy, as well as keeping the yield on 10-year Japanese government bonds near zero, despite Japan’s gross domestic product registering a seventh consecutive quarter of growth in July-September period — the first time in 29 years that an expansion has run so long. 
“We won’t decide to raise our interest rates just because the economy is in good shape,” Kuroda said at a news conference in Tokyo the same day. “What is important is for us to continue our monetary easing with persistence, creating an environment where our 2% inflation target can be achieved and maintained in a stable manner.”

The Fed, meanwhile, has been the only central bank actually tightening rather than just discussing it.

And until very recently Fed Chair Jerome Powell saw the process continuing. From the Wall Street Journal in October:

Mr. Powell also said he believes the U.S. economy is “a long way from neutral”—referring to the point at which interest rates are neither spurring nor slowing economy growth. It is an important focus for Fed officials, some of whom have argued the central bank should stop raising interest rates once they reach that neutral point.

That didn’t work out either. Stocks fell hard and in the late January Fed meeting Powell took it all back:
(Wall Street Journal) – By Wednesday morning, the chances implied by the futures market of any rate increase over the course of 2019 had shriveled to barely 25% and the odds of a cut were over 5%, according to analysts at Bespoke Investment Group.  
The famously plain-spoken Mr. Powell left the market with little doubt that the probability of tightening had shifted, noting on Wednesday that “the case for raising rates has weakened.” 
But policy rates are only part of the story these days. Since the financial crisis, the Fed has used its balance sheet as a powerful tool, buying bonds to affect the shape of the yield curve. Since late 2016, it had begun to slowly unwind those purchases, most recently at a pace of $50 billion a month—a huge number in almost any other context, but not much compared with what was a $4.4 trillion balance sheet. The Fed’s balance sheet has only shrunk by about 10%. 
In what arguably was Mr. Powell’s most significant statement on Wednesday, he struck a dovish tone on this process of “balance-sheet normalization.” The signal was that so-called quantitative tightening would continue for now but end sooner than expected.  
Moreover, he also raised the possibility that the balance sheet could be “an active tool” in the future if warranted—in other words, more bond purchases if markets or the economy cry out for help. Until recently, Fed officials had been insisting the balance-sheet shrinkage was on autopilot.

What does this mean? Several things, all of them momentous:

• 10 years into an expansion, with unemployment below 5% and officially reported inflation at the central bank target of 2%, the global economy is still too fragile to handle historically normal interest rates. The structural weakness that that implies is absolutely terrifying.

• If central banks can’t normalize monetary policy now, they’ll never be able to. Let that sink in. The old conception of monetary policy is over for the remaining life of the current global financial system.

• Since debt is soaring even in this late stage of the expansion with most people working and paying taxes, the financial headwinds that now prevent rate normalization will continue to strengthen. If 2% inflation is necessary to stave off collapse today, then 3% will be necessary shortly. Then 4% and so on, again, for the remaining life of this financial system.

How much time is left?

That’s unknowable of course, but it’s fairly safe to say that this central bank course reversal has ushered in the final chapter.

Russia’s Balancing Act in Syria

The war is coming to an end, and so too might be some of Moscow’s alliances.

By Xander Snyder


After eight years of war, Syria is mostly under Bashar Assad’s control once again. Russia, which joined the war in 2015 as one of Assad’s major supporters, must now consider its future involvement in Syria and its relationship with Assad’s other main backer, Iran. Moscow and Tehran have cooperated thus far, but Russia’s vision for a post-war Syria likely doesn’t include a strong Iranian presence. So what does the future hold for relations between the two countries as their need to work together fades? And how will Russia handle the other major players in Syria now that the war is largely over?

How We Got Here

Before considering what lies ahead, we have to examine how we got here. Russia and Iran cooperated in Syria to achieve a common objective: keeping Assad in power. But in supporting the Syrian regime, they had very different motivations. Russia wanted to distract from its underwhelming performance in Ukraine and its challenging economic situation at home. It also wanted to prove to Russians and the world that it’s still a major global player. Iran had more ambitious goals in mind. For Tehran, Syria was part of a broader plan to expand its influence and control throughout the Middle East. So while Russia was content to see Assad survive the war and pull its forces out once the conflict was over (save for a small contingent in Hmeimim air base and Tartus naval base), Iran wanted to maintain a presence in Syria long after the war’s conclusion. These different ambitions also resulted in different military approaches: Russia supported the Syrian military primarily through air power while Iran committed its own forces and backed proxy groups engaged in on-the-ground combat.

They also had different views on other external actors involved in Syria – primarily Israel, which sees Iran’s presence in southern Syria as a direct threat to Israeli territory. Israel has, therefore, repeatedly struck Iranian and Hezbollah targets in southern Syria, even publicly announcing these attacks (most recently a week ago) to make clear that it will not tolerate an Iranian presence along its border. These are troubling signs for Russia, which would rather attend to more pressing security concerns than the fighting in Syria. Renewed hostilities could lead to the revival of jihadist groups that Assad would need Russia’s help to eliminate.

Russia, however, hasn’t exactly been going out of its way to limit Israeli airstrikes. It has condemned Israel’s attacks against non-jihadist groups in Syria, but it has stopped short of preventing or retaliating against Israeli attacks on Iranian targets because it doesn’t want to risk direct confrontation with Israel for two reasons. First, facing off against Israel’s well-equipped air force would be far costlier than launching airstrikes against militant groups, as it has been doing in Syria for years now. Second, Israel is a close ally of the United States, and a Russian attack on Israeli forces may provoke a U.S. response, which Russia wants to avoid.

Moreover, Russia may actually benefit from limiting Iran’s presence in Syria. It doesn’t want another conflict between Israel and Hezbollah, Iran’s proxy in Lebanon, and the probability of such a conflict will increase as long as Iran’s presence in Syria grows. In addition, with Iran out of the picture, Russia could solidify its place as Assad’s primary patron, especially with much of the fighting now over.

Indeed, there are some indications that Russia is allowing Israel’s strikes to continue. Last September, after Russia blamed Israel for an incident that led to Syrian forces shooting down a Russian military plane, Moscow delivered a number of S-300 air defense systems to Syria. These systems are more advanced than those already owned by the Syrians and would be a greater threat to Israel’s air operations in Syria. So far, though, Syria hasn’t used them against Israeli airstrikes, possibly because the S-300s aren’t operational yet or because Syrian forces still need to be trained to operate the Russian-made weapons. Syrian media have claimed that the S-300s came online in November, while Russian media have claimed that some of the launchers were installed this month and that the systems will be activated shortly.

In January, however, an Iranian lawmaker accused Russia of deactivating the S-300s during a Jan. 20 Israeli strike. Both the accusation and the airstrike came shortly after a Russian military delegation visited Israel to meet with Israel Defense Forces officials. Israel launched more airstrikes a week later and again on Feb. 12 – the S-300s weren’t used against either attack. This is all circumstantial evidence that Russia is delaying activation of the S-300s, but it supports the theory that Moscow doesn’t want Syria to shoot down an Israeli jet with Russian-supplied arms.

Russia may also be concerned about the efficacy of the S-300s. If they were to fail during an attack, it would be an international embarrassment for Moscow, which is trying to expand its arms export industry. Russia could blame Syrian operators for the failure, of course, but that would also be troubling for potential customers who may have concerns over usability. Moreover, Israel has performed drills against the S-300 and demonstrated the ability to penetrate areas covered by advanced air-defense systems in the past, so even if the system works as it should, it may not be able to stop an Israeli strike. In other words, Russia doesn’t have much to gain from activating the S-300s. Why did it deliver the systems if it didn’t want Syria to use them? It needed to responded to the downing of the Russian jet somehow, and this was likely the least consequential way to do it.
Looking Ahead
While Russia’s motivation to cooperate with Iran is fading, it’s finding more and more reason to work with another country that’s vying for influence in Syria: Turkey. Both countries want to eliminate jihadist groups in Syria’s northwestern Idlib province, though they remain at odds over Turkey’s desire for greater control over the Kurdish-dominated regions in northeastern Syria. A larger Turkish presence there could hamper efforts at a political settlement and endanger Assad’s hold over the country. Nonetheless, they have reached an accommodation over certain issues. Earlier this month, following peace talks in Sochi, a Kremlin spokesperson suggested that Turkey could invoke the 1998 Adana Agreement to justify an incursion in northern Syria. (The agreement allows Turkey to pursue fighters from the Kurdistan Workers’ Party – a Kurdish group based in Turkey – 3 miles, or 5 kilometers, into Syria.)

Last August, Turkey and Russia signed an agreement to prevent a Syrian offensive against rebel forces in Idlib and to establish a buffer between the province and Syrian forces. Under the deal, Turkey agreed to handle the jihadist militias in Idlib that were not under its control, most notably Hayat Tahrir al-Sham. But Turkey has largely failed to do so. HTS remains the most powerful force in the province and recently launched an offensive against Turkish-backed militias there. Russia, meanwhile, can’t pull out of Syria while groups like HTS pose a threat to Assad. Turkey may need to send in its own forces, rather than rely mainly on proxies, to eliminate or at least hold back HTS. In doing so, however, it would need to avoid direct confrontation with Syrian forces, which would risk pitting Russia against Turkey.

By not pushing back against strikes on Iran in the south and by accommodating the Turks in the north, Russia has been able to balance these two powers against each other. It’s a strategy that will keep Iran weak and Turkey compliant, at least so Moscow hopes, and it has the added benefit of ensuring that neither becomes powerful enough to challenge Russia in the Caucasus, a region over which the three countries have gone to war many times in the past. Whether the strategy works remains to be seen.

Investors Sound Warning About Markets’ Complacency on Interest Rates

Financial markets have rallied since the Fed dropped a reference to future rate increases; ‘it seems frankly optimistic to expect nothing from the Fed in the next 12 months’

By Akane Otani 

 Some investors are concerned that the assumption underpinning markets’ rally—that the Federal Reserve has stopped raising rates—could be wrong. The floor of the New York Stock Exchange.
Some investors are concerned that the assumption underpinning markets’ rally—that the Federal Reserve has stopped raising rates—could be wrong. The floor of the New York Stock Exchange. Photo: Michael Nagle/Bloomberg News

Stocks and bonds are rising on bets that the Federal Reserve has ended its nearly four-year campaign of interest-rate increases, worrying investors who believe the central bank could upend those expectations later this year.

Since the Fed’s January meeting, a number of investors and traders have concluded that the central bank hasn’t just paused its rate increases, but finished them altogether.

Some believe the Fed’s next move could be to cut the benchmark short-term rate, something it hasn’t done since December 2008, when the global financial crisis forced the central bank to slash rates to near zero.

The shift is unsettling some investors who believe that much of this year’s rebound across stocks and bonds has been fueled by bets that the Fed won’t raise rates again in the foreseeable future. Loretta Mester, president of the Federal Reserve Bank of Cleveland, said Tuesday that interest rates should rise slightly this year assuming the economy grows at the pace that she expects. Money managers will get another look at the Fed’s view on interest rates and the economy on Wednesday, when the central bank is scheduled to release minutes from its January meeting.

The S&P 500 and Dow Jones Industrial Average have extended gains since closing out their best January in decades, with both indexes up around 10% in 2019 and at their highs for the year. Meanwhile, the yield on the two-year Treasury note—which tends to move in tandem with rate expectations—has fallen for three consecutive months, its longest such streak since 2013, according to Dow Jones Market Data. Yields fall as bond prices rise.

“It seems frankly optimistic to expect nothing from the Fed in the next 12 months,” said Isabelle Mateos y Lago, managing director and chief multiasset strategist at BlackRock. “When you look at payroll data, this is not an economy that’s about to be in recession.”

Much of the disagreement over the Fed’s next rate move stems from its decision in January to remove explicit reference to future rate increases from its monetary-policy statement. Before the January meeting, the central bank had included that language in all of its statements since 2015.

The removal, coupled with Fed Chairman Jerome Powell’s comment that “the case for raising rates has weakened somewhat,” helped send the Dow industrials soaring 435 points, or 1.8%, on Jan. 30. Now, federal-funds futures—used by traders to place bets on the course of monetary policy—show the market pricing in a 0.9% chance of the Fed raising rates at least once by year-end, down from about 30% a month ago, according to CME Group. 

Gautam Khanna, a fixed-income portfolio manager at Insight Investment, said he has been increasing the share of rate-sensitive securities such as Treasurys and mortgage-backed securities in his portfolios since the end of last year. That is a response to slowing global growth and growing evidence that the Fed is done raising rates, he said.

There are “too many risks out there,” Mr. Khanna said. “The lion’s share of what the Fed is likely to do this cycle is already behind us.”
Yet a number of fixed-income analysts say the Fed doesn’t appear to have ruled out future rate increases. Instead, they say, the central bank merely indicated that it is on pause for now.
“The communication shift basically went from explicitly saying further rate hikes are warranted to them saying, ‘I don’t know.’ And just saying, ‘I don’t know,’ doesn’t mean there are no more rate hikes coming,” said Jon Hill, vice president and interest-rate strategist at BMO Capital Markets.
One reason some analysts remain skeptical the Fed is done with rate increases: The economy, they say, looks far stronger than it did the last time the Fed decided to lower interest rates.

The U.S. labor market has added jobs for 100 consecutive months, the longest such streak in history. While inflation pressures remained stubbornly muted for much of the past decade, giving the Fed few reasons to accelerate its pace of rate increases, the tight labor market appears to have finally started to translate into a pickup in wages. The Labor Department’s January jobs report showed wages rose at least 3% on a year-over-year basis for the sixth consecutive month, building on what has been the biggest uptick in pay since the end of the recession in 2009.

“Some of the market having a high conviction that the next move is a cut fails to recognize just how tight the labor market is and the fact that growth continues to persist above trend,” Mr. Hill said.

Some pockets of the economy are starting to show signs of weakness. Data point to a cool-down in the housing sector. The Conference Board’s widely watched measure of consumer confidence has fallen for three consecutive months, while a report Thursday showed retail sales fell in December at the fastest pace since 2009.

Then there are variables like the U.S. and China’s trade conflict that stand to exacerbate a slowdown in economic momentum around the world.

“China is probably going to get worse before it gets better, and the U.S. will feel that slowdown,” said Andrea Cicione, head of macro strategy at TS Lombard, who believes the Fed is likely to lower rates by the end of the year.

Still, data on the whole point to an economy that is cooling—not sharply deteriorating. That leaves market bets, particularly for stocks and shorter-duration Treasurys, vulnerable to a reversal, analysts say.

“You don’t necessarily want to assume anything in either direction,” Mr. Hill said.

—Sam Goldfarb contributed to this article.

The Looming Taiwan Crisis

For many years, US policymakers worried that Taiwan would upset the apple cart: not content with the mere trappings of independence, it would opt for the real thing – an unacceptable outcome for the mainland. Now, however, the balancing act is threatened by both China and the US.

Richard N. Haass 

Taiwan President Tsai Ing-wen

NEW YORK – Much of lasting significance happened in 1979. There was the Soviet invasion of Afghanistan and Iran’s Islamic Revolution, which brought to power a regime set on remaking not just Iranian society but also much of the Middle East.

Just as important was the United States’ decision to recognize, effective January 1 that year, the government of the People’s Republic of China – then, as today, run by the Communist Party – as China’s sole legal government. The change paved the way for expansion of trade and investment between the world’s largest economy and the world’s most populous country, and enabled closer collaboration against the Soviet Union.

Diplomacy was based on an intricate choreography. In three communiqués (in 1972, 1978, and 1982), the US acknowledged “the Chinese position that there is but one China and Taiwan is part of China.” It agreed to downgrade its ties with Taiwan and maintain only unofficial relations with the island.

America’s commitments to Taiwan were articulated in legislation (the Taiwan Relations Act) signed in 1979. The US stated that it would “consider any effort to determine the future of Taiwan by other than peaceful means of grave concern to the United States.”

The law stated that the US would support Taiwan’s self-defense and maintain the capacity to come to Taiwan’s aid. Left vague, however, was whether it actually would. Taiwan could not assume that it would; the mainland could not assume that it would not. Such ambiguity was meant to dissuade either side from unilateral acts that could trigger a crisis. Together, the three US-China communiqués and the Taiwan Relations Act form the basis of America’s “One-China policy.”

This structure made for a winning formula. The mainland has enjoyed the most successful economic run in history, becoming the world’s second-largest economy. Taiwan, too, has experienced phenomenal economic success and has become a thriving democracy. The US benefits from the region’s stability and closer economic ties to both the mainland and Taiwán.

The question is whether time is running out. For many years, US policymakers worried that Taiwan would upset the apple cart: not content with the mere trappings of independence, it would opt for the real thing – an unacceptable outcome for the mainland.

Taiwan’s leaders appear to understand that such a decision would be a grave mistake. But they reject the notion of Taiwan’s becoming a part of China under its “one country, two systems” rubric – a formula that has done little to protect Hong Kong’s special status – and refuse to endorse language (the “1992 Consensus”) used by Beijing to describe the relationship between the mainland and Taiwan.

Now, however, stability is also being jeopardized by both China and the US. China is experiencing a significant economic slowdown. This makes Chinese President Xi Jinping potentially vulnerable, as Chinese leaders have derived much of their legitimacy from economic success. The concern is that Xi will turn to foreign policy to distract public attention from faltering GDP growth.

Gaining control over Taiwan would accomplish this. Early this year, Xi publicly reiterated China’s call for unification and refused to rule out the use of force. What worries some in the region is that it cannot be assumed that a US administration that is leaving Syria, is signaling that it will leave Afghanistan, and is regularly critical of allies will come to Taiwan’s defense.

The US also seems less protective of the diplomatic arrangements that have worked for the past 40 years. Before becoming President Donald Trump’s national security adviser, John Bolton wrote in The Wall Street Journal that it was “high time to revisit the ‘one-China policy.’” Trump also became the first president (or president-elect, as he was at the time) since 1979 to speak directly with Taiwan’s president.

Most recently, five Republican senators wrote to Nancy Pelosi, the Speaker of the US House of Representatives, urging her to invite Taiwan President Tsai Ing-wen to address a joint session of the US Congress, an honor almost always reserved for heads of government or state. Doing so would be inconsistent with America’s unofficial relationship with Taiwan and would elicit a strong mainland response.

All of this is not taking place in a vacuum. It comes at a time when the US-China relationship has reached a 40-year nadir, the result of trade frictions and US unhappiness with Chinese assertiveness abroad and increased repression at home. A good many Americans, in and out of government, want to send the mainland a message and believe there is little to lose in doing so.

It is far from clear that this calculation is correct. A crisis over Taiwan in which the mainland introduced severe sanctions, imposed an embargo, or used military force could threaten the autonomy, safety, and economic wellbeing of the island and its 23 million people. For China, a crisis over Taiwan could wreck its relations with the US and many of its neighbors and rock an already shaky Chinese economy.

For the US, a crisis could require coming to Taiwan’s aid, which could lead to a new Cold War or even a conflict with the mainland. A decision, though, to leave Taiwan to its own devices would undermine US credibility and possibly prompt Japan to reconsider its non-nuclear status and alliance with the US.

In other words, the risks for all concerned are high. It would be best to avoid symbolic steps that would be unacceptable to the others. The status quo is admittedly imperfect, but it is far less imperfect than what would follow unilateral actions and attempts to resolve a situation that doesn’t lend itself to a neat solution.

Richard N. Haass, President of the Council on Foreign Relations, previously served as Director of Policy Planning for the US State Department (2001-2003), and was President George W. Bush's special envoy to Northern Ireland and Coordinator for the Future of Afghanistan. He is the author of A World in Disarray: American Foreign Policy and the Crisis of the Old Order.