Would the US Treasury default?

Some minutes ago I found this paragraph by Greg Mankiw in his blog:

"Thanks to the advent of credit derivatives -- financial contracts that allow investors to speculate on or protect against default -- we can now observe how likely global markets think it is that Uncle Sam will renege on America's mounting debts. Last week, markets pegged the probability of a U.S. default at 6 percent over the next 10 years, compared with just 1 percent a year ago".

Yesterday midday I was precisely talking about this possibility with a colleague here in Bs. Aires. Effectively, some local investors have their savings in foreign accounts, and the flight to quality was the prevailing reaction to the mega-earthquake upcoming after the subprime crisis blow-out. The underlying question to that dynamics is: how different (in qualitative terms) is it to Argentina's crisis of year 2001? How about state governments in US? Are they solvent? Will Obama be forced to provide a giant bailout for California and other states? Nothing indicates that CDs market will be with low activity level this year. But it should be needed to start to discuss in an open and frank way, what do we mean when we talk about (and teach in universities) the so-called "risk-free" interest rate.

Hector Rubini's blog

Economics, finance and other related issues about emerging and developed countries