The United States had a gun to the debt?

Since the public debt of the United States amounted to 12,000 billion dollars, we know that Europe is not alone to be at risk of debt distress. Japan is not doing better. And yet this is not the federal debt that is most disturbing.For at least a year, California is in trouble and his last budget was approved in the snatch. The problem is much broader: Robert Parker of Credit Suisse Securities, predicted that the attention of investors will change the second half of Europe to the United States.

The reason we have not yet seen an explosion is nothing but the exceptionally low rate of reference obligations of the federal state. The fact that the margin has increased to prevent the combined cost remains at historically low levels. Yet no advances to predict that something will continue in the second half.

If local governments and states should see their funding costs rise in the coming months, serious questions would arise.The States are generally financed through bonds of infrastructure, industrial revenue bonds, which are exempt from tax . This allows them to benefit from favorable terms. Things change and the concern is even greater than many such bonds are in the hands of individuals.

The basic problem is the set of budget deficits from 2008 to 2011 grew by 400 billion dollars. They must be funded in one way or another. As tax revenues are not likely to increase, the debt will be essential. It would not be alarming if we esteemed the pension deficit between 1000 and 3000 billion for local employees. If the stock market improve, the deficit should diminish. But they are prodigious amounts.

At the root of this situation are two phenomena: first, a traditional negligence states, including social programs, medical and educational exploded. The second is a change in legislation that has put the burden on States spending federal returning THE STATE.

If the situation in Europe appears to be cooling somewhat, a new anxiety appears. Banks are the largest investors in government bonds: the risk on these obligations, or even an obligation to make a substantial depreciation on these assets could weaken European banks. Just about Iceland, Europe has a stock of 8 billion euros, including 2.2 for French banks and only about 500 million for German banks. Faced with these difficulties, the only solution is growth. It is difficult to know what are the growth prospects of the Eurozone. The thing is clearer for the United States.

It’s a race against time to prevent a massive collapse of public finances in the world. More than ever, the alternative between rigor and growth appears to be an impossible choice. We must do both, while ensuring that budget cuts do not put consumers in greater difficulties: it is a difficult art that will clearly go beyond our political differences.

This choice has revived the debate a new economic stimulus plan in the U.S. who are not ready to cut spending on health, education and military representing 80% of the federal budget. The Europeans have excluded any recovery initiative and focus on austerity. The coming months will be tense.