Worries about European sovereign debt have, if anything, made investors bigger fans of the US as a relative haven from the storm ... so far. Interest rates on 10-year Treasury bonds plunged as eurozone anxiety rose, dipping to below 2 percent during September.
But even if the US isn't expected to default on its debts, it has the same challenge of maintaining investor confidence over time. Already, one prominent rating agency has cut the US credit grade. And US debt levels, as a share of the economy, are in the "eurozone" in size if not geography. At these levels, the risk is that debt will contribute to economic weakness that makes it harder to dig out of the hole.
Federal Reserve Chairman Ben Bernanke, among others, has been calling for the US to begin serious steps to control its long-term debt build-up. "Advanced economies like the United States would do well to re-learn some of the lessons from the experiences of the emerging market economies, such as the importance of disciplined fiscal policies," he said in a Sept. 28 speech.
