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Crunch time for America and Japan

The US is likely to lose its AAA credit rating in 2013, and that will also be the last year in which both Japan and the States will be able to carry on borrowing at risk-free rates without sorting out their unsustainable fiscal deficits. That was the blunt warning today from Willem Buiter, former member of the Bank of England Monetary Policy Committee, now Chief Economist at Citigroup.

Speaking at the CFA Institute conference in Edinburgh, Mr Buiter added that the bond market might well force the inevitable 3% rise in US Treasury bond yields even earlier than that date, for example if Chicago was about to go bust. The best chance of the US finally getting to grips with its huge debt burden would be immediately after the 2012 elections, but as yet there are absolutely no signs of a bipartisan approach to a solution.

Written by Jonathan Davis

May 10, 2011 at 3:27 PM