Report: U.S. Barely Ahead of PIIGs

2011 April 25
by bc3b

US finances are in almost as troubled a state as the worst-hit members of the euro zone, economists say, underscoring the pressing need for Washington to reach agreement on how to reduce the deficit.

A gauge of “sovereign risk” from economists at Deutsche Bank placed the United States just behind Greece, Ireland and Portugal among 14 advanced economies.

The report, from economists led by Peter Hooper, warned that a failure to make substantial political progress on deficit reduction “would substantially raise the risk of a bond market crisis”.

The warning comes days after Standard & Poor’s said that it may lower its AAA assessment of the US, amid a political log jam over debt reduction in Washington, and will intensify market concerns about Western governments’ debts.

Last night George Papandreou, the Greek Prime Minister, strongly criticised credit rating agencies, saying that they were “seeking to shape our destiny and determine the future of our children”.

Deutsche Bank’s analysis acknowledged that the risk attached by financial markets to US debt remained very low, as demonstrated by the country’s modest borrowing rates. That was in part due to the US dollar remaining the premier reserve currency for world governments.

However, the report noted: “Reputation and reserve currency status can be lost, and failure to move US fiscal policy off its currently unsustainable path would certainly increase the risk.”

For the time being, though, Democrats and Republicans have been mired in mudslinging over the debt ceiling.

Read more:

Hat tip: The Wall Street Journal

15 Responses leave one →
  1. 2011 April 25 5:50 pm
    mulletover permalink

    Thanks be to Allen.

  2. 2011 April 25 5:53 pm
    bc3b permalink

    Some one is going to have to stand up to the spending. We thought is would be Boehner and the House Republicans. We thought wrong.

  3. 2011 April 25 5:55 pm
    drdog09 permalink

    Already said my piece the last two days. But I don’t disagree with the post as offered.

  4. 2011 April 25 6:20 pm

    Any bets on what polling firm will be the first to show Hussein below 40% ?????

    Any guesses????

  5. 2011 April 25 6:20 pm

    Actually Harris is at 38% so never mind

  6. 2011 April 25 6:33 pm
    gnqanq permalink

    How in the world can we reduce our debt when the other side of the aisle are true believers in deficit spending. Plus they believe that there is more than enough cash, just an issue of more taxation.

    The other side is like those on the Titanic that did not believe the ship was sinking.

  7. 2011 April 25 6:34 pm
    RepublicanPundit permalink


    Any bets of which of the alphabet networks that mention the Harris Poll you referred to in you #6?

  8. 2011 April 25 6:36 pm
    gnqanq permalink

    RP – must be WMIA.

  9. 2011 April 25 6:41 pm
    justrand permalink

    tough work day…just now logging on.

    Lets’ see…Muslims are killing Christians, the U.S. is broke (and getting broker), Obama’s working harder each day to destroy America, Trump is still just a headline grabbing moron with bad hair.

    Yup, business as usual!

  10. 2011 April 25 8:43 pm
    justrand permalink

    the NLRB is suing S. Dakota and Arizona over their (gasp!) having laws that guarantee a SECRET BALLOT!!

    The NATIONAL Labor Relations Board…supposedly and impartial broker between Labor and Management…is suing two States because they are trying to preserve the sacred American right to cast a vote in private. Ah…but THESE votes are those that determine whether a new Union gets formed. And if the vote is secret, then the Union thugs don’t know who to threaten.

    The New America? You betcha!

  11. 2011 April 25 8:49 pm
    drdog09 permalink

    A good one at DbD —

    Obama plan indeed.

  12. 2011 April 26 6:09 am
    justrand permalink

    splendid, drdog! and utterly accurate!

  13. 2011 April 26 6:47 am
    drdog09 permalink

    affirmation of my continuing thoughts on the debt matter —

    MEGAN MCCARDLE: What A Crisis Looks Like: “The real issue starts, not when China starts selling our bonds, but when China stops buying our bonds. As soon as that happens, we’re in big trouble. . . . A lot of people tend to assume that there will be warning signs telling us that we need to get our fiscal house in order: China will slow down its bond purchases, interest rates will gradually rise. But in fact, the lesson of fiscal crises is that the ‘warning signs’ we’re watching for often are the crisis. Unless interest rates increase (or debt buying decrease–which is really the same thing) in a very gradual, orderly fashion, then by the time your interest rates rise, it is already too late to do anything easy; your debt service burden forces you into dramatic fiscal measures, or default. . . . People are willing to lend at decent rates, until suddenly they’re barely willing to lend at all.”

  14. 2011 April 26 11:21 am

    “We thought is would be Boehner ”

    No we didn’t .

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