BEN BERNANKE said today that the TARP plan, and any subsequent debt-financed bail-outs, pose no credit risk to America. That is probably true, but it’s a rather remarkable statement.

We have arrived at our current situation due in part to the insatiable demand for American debt. During the savings glut that characterised much of the past decade governments and individuals desired American assets because they viewed them as relatively risk-free. That enabled the government to run up enormous debts, while facing low real rates (especially on longer-dated securities), and made credit a little too easy.

Now America is counting on its assets' risk-free status to persist. It plans, in fact, to help save the global economy by incurring still more debt. The risk-free perception means that America can borrow whatever it needs for a low cost, and can do so without threatening its risk-free status. This isn't typically how credit-worthiness works.

…