So after leaving it to the very last second (well maybe hours) America avoids a voluntary default. Most people didn’t seem to think it was going to happen. Although I suspect that it was more hope than insight. Not only has a default been avoided, it looks that for now at least there will be no downgrade of US treasures. Odd that I think; the US looks in a bad way. The economy is slowing. Growth slowed for the last quarter and the previous quarter was revised down. Manufacturing is down too. However this new data might serve to support a watered down deficit reduction plan. The new debt deal will cut spending by about $2.5T, about half what the rating agencies were calling for. if the economy is slowing then perhaps this isn’t the time for tax increases and spending cuts. In some ways the US and UK are following different paths. Who will fair better? On the face of it the UK is getting support from the markets. With interest rates on it borrowing dropping to an all time low, 2.75%. I can’t thinking that perhaps the world is just looking the other way at the minute. Problems in the US, and further crises brewing in Europe (Spain and Italy have seen there borrowing costs increase sharply) mean that no-one is paying close attention to the UK right now. How long will that last I wonder.
