What, Me Worry?
WASHINGTON: Today Moody’s warned the US of an impending credit downgrade due to the country’s worsening debt situation.
Moody’s Investors Service warned that lack of U.S. government action on the budget deficit increases the likelihood of a negative outlook on the country’s top AAA credit rating.
The Moody’s report, which came hours after a downgrade of Japan by Standard & Poor’s and an IMF warning on growing budget deficits in both countries, reiterated previous comments made by the agency late last year.
Moody’s had said in December that the extension of Bush-era tax cuts would add to the likelihood of a negative outlook on the U.S. rating in the next two years.
Lower debt ratings typically push up a country’s borrowing costs. A negative outlook makes a rating downgrade more likely in the next 12 to 18 months. MoneyNews.com
The NIP has written multiple times regarding previous warnings from Moody’s. The US Ignoring Moody’s is similar to a homeowner ignoring calls from their mortgage banker. Eventually credit ratings our downgraded, interest rates go up and penalties are instituted.
We are seeing the result already. During Chinese President Hu Jintao’s visit to the US Obama hosted an unprecedented state dinner for the president of a country that has one of the worst human rights abuse record. How long until the Chinese demand higher interest rates to cover our increasingly worthless dollar?
This is just the beginning of the pain that awaits as our Congress and President blithely spend us into oblivion.
Beware the Ides of March
NEW YORK CITY: Beware the Ides of March, so the seer warned Julius Caesar in 44 B.C. Twenty centuries later another seer warns a modern-day Caesar that his course of reckless spending threatens the destruction of our country. Like Julius Caesar, Caesar Obama pays no attention to the soothsayer.
On March 15 Moody’s warned the US for the 3rd time that the impending downgrade of our nation’s credit rating is looming:
The gold-plated credit rating of the United States — an article of faith across America and, indeed, around the world — may be at risk in coming years as the nation copes with its growing debts…
Moody’s said the United States and other major Western nations, particularly Britain, have moved “substantially” closer to losing their gilt-edged ratings. The ratings are “stable,” but “their ‘distance-to-downgrade’ has in all cases substantially diminished,” the credit ratings agency said…
“Growth alone will not resolve an increasingly complicated debt equation,” Moody’s said. “Preserving debt affordability” — the ratio of interest payments to government revenue — “at levels consistent with Aaa ratings will invariably require fiscal adjustments of a magnitude that, in some cases, will test social cohesion.” [Empahsis added] David Jolly and Catherine Rampell, New York Times
Likely scenarios if the US loses its triple-A rating: Read more…
Weren't you listening before? Now you're joining my band. Hope you can play guitar.
LONDON: The UK Pound declined against the dollar today after the market digested Moody’s warning about a possible downgrade of the country’s credit rating. “Britain and the U.S. had ‘resilient’ Aaa ratings, as opposed to the ‘resistant’ top ratings on Canada, Germany and France, Moody’s said in a report today,” according to Bloomberg.
Credit-rating agency Moody’s Investor Services on Tuesday warned that the United States and Great Britain may test the limits of their AAA sovereign ratings due to deteriorating public finances.
“These are the AAA countries whose public finances are deteriorating considerably and may therefore test the Aaa boundaries,” wrote Pierre Cailleteau, managing director of Moody’s sovereign risk group… Read more…
We may all be singing in green tights
XINHUA: Today’s news from Xinhuanet.com calls attention to yesterday’s warning from the credit rating giant Moody’s that the US is in danger of losing its Aaa credit rating.
This report comes out on the same day Christina Romer, Chairwoman of the President’s Council of Economic Advisers testifies before Congress that the Stimulus Package is a failure. We expect Congress to take her testimony as a call to pass Stimulus II, more of the same. (We report on her testimony here.)
It is appropriate that we use XINHUA as our dateline since the Chinese are our biggest creditors. Did our reckless administration and Congress think that they could spend our way into oblivion and the Chinese wouldn’t notice? Read more…
WASHINGTON: Saturday saw the House pass a $1.2 trillion continuing resolution to fund the government through the rest of this year. The resolution contains cuts totaling $61 billion. Cuts target NPR, Planned Parenthood, border security, education and other federal programs. Senate Majority Leader Harry Reid and other senate democrats have called the measure “extreme.” Speaker of the House John Boehner has threatened a shutdown of the federal government if the resolution is not passed. Obama and the democrats have vowed a fight on Boehner’s threat to shut down the government.
With all the posturing on both sides it is easy to not see the forest for the trees. $61 billion is only 5% of $1.2 trillion dollars. The US will have to borrow $516 billion to finance the $1.2 trillion and our politicians are arguing about defunding NPR and Planned Parenthood? What is needed is a much larger cut, say $516 billion.
Let’s look at it this way. Your household has a credit card limit of $25,000 and you are over the limit by $10,000, owing a total of $35,000. Your bank calls you to reign in spending and threatens to report you to the credit agency and downgrade your credit (think Moody’s). You tell the bank how serious you are about cutting back, and you tell your banker that you were thinking about adding another $20,000 to your debt this year but are going on an austerity spending program and are only going to spend another $19,000, that will hold your debt to “only” $49,000. That’s the kind of “extreme” fiscal discipline the Republicans are suggesting.
BTW- your share of the Federal debt? $45,000 and climbing. (See the live counter to the right.) You will need to pay it back. Why aren’t you angry?
The latest posting today of the National Debt shows it has topped $14 trillion for the first time.
The U.S. Treasury website today reported that as of last Friday, the last day of 2010, the National Debt stood at $14,025,215,218,708.52.
It took just 7 months for the National Debt to increase from $13 trillion on June 1, 2010 to $14 trillion on Dec. 31. It also means the debt is fast approaching the statutory ceiling $14.294 trillion set by Congress and signed into law by President Obama last February.
The NIP has written multiple times regarding previous warnings from Moody’s. It appears that this administration is all to happy to push our economy into economic collapse. If you think this doesn’t matter to you, you are sorely mistaken.
Greek demonstrators scuffle with riot police. Photo AFP
ROME: Today Spain was added to the list of countries with severe debt problems. Standard and Poor’s cut Spain’s rating down from AA+ to AA. This step came just one day after S&P downgraded Greek debt to junk status, and Portugal was downgraded two levels. Today’s action spooked Italy’s investors enough to prompt a selloff in Italian government bonds.
European countries are faced with massive debts due to overspending on government entitlement programs and the result is general economic destabilization. Greece’s economic problems are spilling into the streets as a general default looms. Last week’s talks of EU and IMF bailouts have been met with resistance, and the result is an 80% chance of a Greek default this week. If so, French and German banks could suffer massive losses.
The NIP has warned repeatedly that overspending on government entitlements lead to unsustainable debt loads. The inevitable downgrades of the credit of sovereign states lead to civil instability. The US is not immune. Moody’s three warnings to the US signal a possible beginning of the end to US dollar strength and economic stability.
It’s time to throw out the politicians who buy votes with other people’s money. They are spending our countries into oblivion. Instead of putting their citizens to work, politicians all over the world support the unemployed with massive subsidies. Politicians care only for votes, not for the welfare of the countries they serve.