The Fiscal Cliff Is Already Falling

As President Obama and the Republican challenger, Mick Romney, argue the toss about policy going forward and in particular the impending,” US fiscal cliff,” we thought that it might be enlightening to glance at the current situation in respect of global choice of safety.

First up we show a chart of Global Debt/GDP where one can note the worrying jump of late.

 

There are only two ways in which this trend can reverse, either GDP grows, which appears unlikely according to the most recent IMF estimates, OR the debt is either repaid or defaulted on.

Since the global financial crisis commenced in 2007 there has been an

increasing amount of debt defaulted on, including the so called,” risk free investment class,” Sovereign or Government debt.

The next chart confirms the rapid change in the number of AAA rated “Sovereigns,” left standing, according to rating agency, Standard and Poors, and the Bank of International Settlements, better known as the Central Bankers Bank.

Remember, AAA is the safest of the safe and the number has fallen off a cliff.

 

 

Finally, if we drill down to look at the diminishing AAA’s still available, we have the UK likely to miss its £129BN deficit target, adding pressure for another exit from this exclusive AAA club.

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