The United States Is Not Greece

For the last three weeks I have been convinced that the U.S. will soon lose their AAA rating. Naturally, I’m not the only one. I even consider this degradation to be deserved. It must be remembered, however, that it has nothing to do with any default of the Treasury.

For now, it remains likely that a last-minute compromise will prevent the disaster that would represent a selective default by Uncle Sam.

On the other hand, without an early agreement to reduce the debt of the United States over the long term, agencies will penalize the irresponsibility of elected American officials.

The big difference between the U.S. and Greece is market access. America has no problem borrowing on the markets. What could prevent the U.S. from continuing to borrow is the law that prohibits it from going beyond a debt ceiling.

The facility of borrowing in the United States is illustrated by the very low rates demanded by investors. For example, for two-year bonds, 0.4 percent, for ten-year bonds, 2.97 percent. France pays 1.3 percent and 3.25 percent, respectively.

From there, one can conclude that if America deserves to be degraded and no longer benefit from the AAA rating, France could follow. There is only one more step, maybe not so great as this.

For the record, the returns required for Italian bonds are 4 percent for two years, and 5.66 percent for up to 10 years.