The Blubber

A quick survey conducted by Deutsche Bank found that 80% of respondents believe the current path of the U.S. federal deficit is unsustainable and will eventually lead to either a financial crisis or intervention by the Federal Reserve.

The poll, which collected input from 450 participants, asked for reactions to a projection from Moody’s that the U.S. deficit will approach 9% of GDP by the year 2035.

Only 20% of those surveyed anticipated a smooth outcome, with 5% expecting the economy to grow strongly enough to offset the deficits, and 15% believing markets would be able to absorb the fiscal imbalance without major disruption.

“Four out of five respondents anticipated a more disruptive scenario,” Deutsche Bank wrote in its summary. “Of those, 54% predicted a crisis would force lawmakers to take fiscal action, while 26% expect the Federal Reserve would need to step in through additional quantitative easing to help finance the deficit.”

Interestingly, the bank noted that recent shifts in interest rates did not appear to influence participants’ views. “We checked to see whether the substantial rally in rates over the last day had any effect on the results—it didn’t,” analysts said. “Responses remained strikingly consistent throughout the polling period.”

The findings underscore increasing concern about the sustainability of U.S. debt levels, with Deutsche Bank stating that “80% effectively view the U.S. debt trajectory as unsustainable.”

Still, there’s little agreement on when the situation might become a pressing market issue. “There’s likely no consensus on the timing of when this becomes a serious problem,” one Deutsche Bank analyst said. “That may be a question for another survey.”