2008-11-11blogspot.com

It may come as a shock, but there are credit default swaps on the U.S. government and they have become more expensive -- in tandem with an increase in the spread between two- and 10-year notes.

Around here, we suggested within the past year -- after Moody's announced that the US could risk a downgrade on its Sovereign debt within ten years -- that the US could face this risk within one year. We are moving far faster towards that reality than Moodys' (which isn't a surprise, given the now notorious behind-the-ball performance of the Big Three credit agencies).

Now that the Fed and US government have shown a propensity to give out money and credit in the midst of crisis as if there were no tomorrow, we think the only reason there is not more discussion of US sovereign default is simply because its not polite to talk about it.



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