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A "world government" would involve much more than co-operation between nations. It would be an entity with state-like characteristics, backed by a body of laws. The European Union has already set up a continental government for 27 countries, which could be a model. The EU has a supreme court, a currency, thousands of pages of law, a large civil service and the ability to deploy military force. So could the European model go global? There are three reasons for thinking that it might. First, it is increasingly clear that the most difficult issues facing national governments are international in nature: there is global warming, a global financial crisis and a "global war on terror". Gideon Rachman - Financial Times

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The panic in global financial markets has sparked an unprecedented rush into safe US Treasury securities, driving yields on short-term government notes down to almost zero.(...) The low yields reflect a surge in demand for these instruments, seen as the safest in the world during times of turmoil.(...) Analysts say the fear factor has pushed up demand for Treasuries, since investors are virtually certain the US government will not default.(...) Bob Eisenbeis, analyst at Cumberland Advisors, said the unprecedented low yields are a sign of "dysfunction" in markets. Eisenbeis said US municipal bonds are paying upwards of 6.0 percent tax-free and corporate bonds even more, but that fears of default and a lack of knowledge about underlying bond quality have led investors to shun these alternatives. One reason for the surge in demand for Treasuries, said Eisenbeis, is the Federal Reserve's decision to flood financial markets with liquidity including through other central banks. Many central banks and commercial banks are reluctant to use this cash for traditional lending, and are buying Treasuries to ride out the storm, Eisenbeis added. A big question for the market is whether the Treasury market has become a bubble that will burst. Although the low rates allow Washington to borrow money cheaply, Eisenbeis said such a scenario could be perilous for the economy and the dollar.(...) "There are lots of reasons to believe this Treasury rally is unsustainable, and that a day of reckoning is fast approaching," he said. "When you have this huge flood of liquidity into the marketplace, that can't last forever," he said. A bursting of this bubble could mean a rush out of Treasuries, forcing the government to pay higher rates on an unprecedented amount of debt. (...) Mike Larson, an analyst at Weiss Research, says the long-term bond market could be "the biggest bubble of all," worse than the dot-com and real estate bubbles.(...)"Treasury bonds almost never move this far, this fast. And interest rates, which move in the opposite direction of bond prices, almost never fall this far, this fast," Larson said. (emphasis mine) AFP

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