Published: August 19 2009 03:00 | Last updated: August 19 2009 03:00 Markets may be focusing on the nascent revival of the US economy - but the country's fiscal position still gives profound cause for concern, says Jeremy Batstone-Carr, director of private client research at Charles Stanley. The total US debt to stated GDP ratio is at an all-time high of 350 per cent - and would be twice that level if unfunded pension liabilities were taken into account, he says. Financings a deficit of this magnitude is proving problematic he says. In spite of authorities claims that that demand remained strong for US Treasuries in recent auctions, the truth is that the Federal Reserve alone which is doing the mopping up. The authorities are not actually trying to salvage the economy so much as to delay the date at which default is formalised. Mr Batstone Carr says it is clear external demand for government backed financial products is dwindling and the process of printing money is far greater than was thought. Just how sustainable is the economic revival when consumers and government alike are maxed out on debt, where tax revenues have collapsed, where consumption and confidence are at rock bottom and credit is only available to those with the most spotless of ratings? We believe the risk of US Default remains an event which would result in dollar collapse, hyper inflation and a prolonged period of economic stagnation.
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Jeremy Batstone-Carr, Charles Stanley
Monday, 31 August 2009
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