When Euro Debt Crisis is still in a deadlock, US Supercommittee, who are responsible for coming up with USD1.5 trillion in budget deficit cuts, admitted that they would not reach an agreement by its November 23rd deadline.
The Select Committee on Deficit Reduction (Supercommittee) had been appointed this year, following a review of the burgeoning US deficit. The committee, made up of both Democrats and Republican officials, had fundamentally
disagreed on the level of spending cuts and taxes that were needed to achieve the target.
The Euro Debt Crisis has overshadowed US Debt Crisis in the past two months. If you are somehow still optimistic about US debt situation, take a look at US fiscal deficit as a percentage of GDP as below.
The rating agencies, behaved the same confusing way as they always did, came out to reaffirm US Credit Ratings
- S&P : AA+
- Moody’s : Aaa
- Fitch : AAA
Another interesting phenomena is that, despite the US debt situation, US Treasuries continue to advance and 10-year yields are now below 2%, as investors search for safe haven assets.
Do you really want to lock yourself into a ten years debt with only 2% interest and your debtor does not seem to have enough money to pay you?
I think investors start to become irrational as this kind of massive debt crises have never happened before. Are you, like many banks, research institutions, fund managers, investing by looking at your rear view mirror?