Props to Zerohedge (the best English-language financial news aggregation service in existence anywhere) for the heads up.
- …the major factor driving credit quality is the relatively high level of debt and the difficulty in significantly cutting spending. We are taking a negative action not based on the delay in raising the debt ceiling but rather our concern about the high level of debt to GDP in excess of 100% compared to Canada’s 35%. Nonetheless, since the US’s debt is denominated in dollars, a hard default is unlikely.
Nota Bene
History has proven that defaults on domestic public debt do occur. In fact, seventy out of three hundred twenty defaults since 1800 have been on domestic public debt (1). Egan-Jones does not view a country’s ability to print its own currency as a guarantee against default. Additionally, Egan-Jones generally views cases of excessive currency devaluation as a de facto default.
1. “This Time Is Different: Eight Centuries of Financial Folly”, Reinhart & Rogoff, p.111, 126
This just in: video from CNBC, includes a discussion of EU contagion risk. U.S. discussion late in the interview. Props to KD at Market-Ticker for the link.
http://video.cnbc.com/gallery/?video=3000033600