While the world is viewing US treasuries as a safe heaven, Americans think they are a rather risky proposition. In a recent FT/Harris poll, 46% of the American people think it likely that the US government will ‘default’ in the next decade and only 33% think such ‘default’ unlikely. Only the French are more pessimistic about their government finances. 53% of the French expect their government to default in the next decade while 27% think it unlikely. The Germans are the most optimistic. Only 28% believe their government may ‘default’ while 43% think it unlikely.
It may be easy but wrong to dismiss popular financial wisdom. Public sentiments have a certain imminent logic. Germans know their finances are pretty much in order and doubt that their government would dare jeopardizing it with too large a bailout of weak European economies. Moreover, the weakening of the Euro will so increase the competitiveness of German exports that it will erase much of the cost of the current Greek bailout.
The French know they are too big to bail out and consider the official growth projections much to optimistic. The same can be said about Americans who are in addition mortified by the Obama administration’s rapid enlargement of government debt not to mention the Fed’s ongoing borrowing vast sums of money not only to finance government programs but also to hand them over to banks for zero percent.
The Spanish and Italians hope somebody else will end up paying. Americans know better. They understand the limits of tax and spend and I suspect they will let their elected representatives hear from them loud and clear come election day.
