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USA Just Downgraded AA+ to AA with Negative Outlook

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USA Just Downgraded AA+ to AA with Negative Outlook

Old 04-05-2012, 07:56 PM
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Default USA Just Downgraded AA+ to AA with Negative Outlook

I read something the other day that said Americans intuitively know everything is not alright. We are told the employment numbers are up, but folks aren't buying it. We are told the market is making a comeback, but private investors continue to pull their money out. We are told housing has hit bottom and sale are up, but ...

Today, Egan Jones made another move. Note: FJ is the ONLY ratings agency not beholding to big banks, politics, or vested in the market. EJ knocked the US triple-A rating months before the other rating agencies got in line and followed suit.


Egan Jones Downgrades USA From AA+ To AA, Outlook Negative


A few weeks ago when discussing the imminent debt ceiling breach, and the progression of US debt/GDP into the 100%+ ballpark, we reminded readers that in February S&P said it could downgrade the US
again in as soon as 6 months if there was no budget plan. Not only is there no budget plan, but the US is about to have its debt ceiling fiasco repeat all over as soon in as September. Which means another downgrade from S&P is imminent, and continuing the theme of deja vu 2011, the late summer is shaping up for a major market sell off. Minutes ago, Egan Jones just reminded us of all of this, after the only rating agency that matters, just downgraded the US from AA+ to AA, with a negative outlook.http://www.zerohedge.com/news/egan-j...tlook-negative
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Old 04-06-2012, 05:09 AM
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Yep- I saw that report, too. I wonder if all the rating agencies are too generous.

If a publicly-traded company was in the same financial situation as the US Government, I expect the company's debt rating would be several steps lower than AA, more like junk status.
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Old 04-06-2012, 05:53 AM
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Egan Jones....seriously?

Hey great news on the jobs front. Last month the economy produced far fewer jobs than predicted .... and the unemployment rate dropped. We should be downgraded for having a federal government packed with econtards.
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Old 04-06-2012, 09:24 AM
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I think the other rating agencies secretly get their ratings data from Egan Jones. Except Fitch, which issues rating based on how the French populous sentiment is going at the time. It was great when France and Germany were in the pissing natch over what to do about Greece. Fitch (a French ratings agency) came out and down graded all of the German banks.
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Old 04-06-2012, 11:06 AM
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Originally Posted by Eyeball View Post
I read something the other day that said Americans intuitively know everything is not alright. We are told the employment numbers are up, but folks aren't buying it.........
I have heard this talk a lot. The "tell" on this will be if incumbents get slaughtered in the fall or not.
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Old 04-06-2012, 11:25 AM
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And yet dispite all this, the entire world continues to flock to buy Treasury Bonds, even though they pay close to zero interest. Sometimes it seems like the rest of the world has more confidence in the US economy than some of our own citizens.
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Old 04-06-2012, 11:46 AM
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Originally Posted by TopCat View Post
And yet dispite all this, the entire world continues to flock to buy Treasury Bonds, even though they pay close to zero interest. Sometimes it seems like the rest of the world has more confidence in the US economy than some of our own citizens.

No, not really. At one time, yes, but not anymore. The Treasury has a fund to buy back 'paper'. That fund is at an all-time low, meaning the Treasury is buying back bonds at an unprecedented level. The bonds are being returned by international entities. The first big wave was via a dump by China following some harsh word out of W DC about currency manipulation in Sept '11. It was reported again in Dec '11. China has since dump about a total of about 1/3 of her Treasuries. Russia has dumped over 1/2 of what she was holding, or perhaps she is totally divested of US Treasuries, now. Brazil is totally divested, and India is also dumping. Mexico no long holds US paper, not since Clinton 'gave' Mexico $25-billion to stabilize the peso. Japan has been wanting out, Germany is letting some US Treasuries slide away, too.

Note: the BRICS -- Brazil, Russia, India, China, South Africa, the overwhelming bulk of developing economies (emerging markets), have come together to create their own bank and will challenge the US dollar as the reserve currency. All of OPEC wants out from under the US dollar, too. Me thinks they will prevail against the USD. Any country wanting to do business with the BRICS emerging markets will need to trade in BRICS-dollars.

The real problem today is the Swiss Franc. That is where people are flocking to park their money. It is causing a problem for the Swiss because it is strengthening the Franc against the Euro and causing all the usual problems that come with a currency imbalance.
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Old 04-06-2012, 12:00 PM
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And all the idiots that get voted in are doing nothing about our fiat currency. Your boy romney, obama, santorum, gingrich are all a bunch of fools. Wake up people, our monetary policy is a giant fail.
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Old 04-06-2012, 01:52 PM
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Originally Posted by TopCat View Post

And yet dispite all this, the entire world continues to flock to buy Treasury Bonds, even though they pay close to zero interest. Sometimes it seems like the rest of the world has more confidence in the US economy than some of our own citizens.

Here you go, from the fine folks over at MoneyNews. You can see how many people could incorrectly conclude there is a demand for US paper:



WSJ: Fed Buying 61 Percent of US Debt

The Federal Reserve is propping up the entire U.S. economy by buying 61 percent of the government debt issued by the Treasury Department, a trend that cannot last, Lawrence Goodman, a former Treasury official and current president of the Center for Financial Stability, writes in a Wall Street Journal opinion article published Wednesday.

"Last year the Fed purchased a stunning 61 percent of the total net Treasury issuance, up from negligible amounts prior to the 2008 financial crisis," Goodman writes.


Goodman also warns that U.S. economy and markets are “at risk for a sharp correction” if conditions aren’t “normalized.”


"This not only creates the false appearance of limitless demand for U.S. debt but also blunts any sense of urgency to reduce supersized budget deficits."
...

Fed intervention in the government debt market makes demand for Treasury bonds appear higher than it really is, as foreign creditors and other investors have fled U.S. government debt instruments and are looking elsewhere until the government makes serious attempts to curb spending and narrow its gaping deficits.

Goodman notes that foreign investors like Japan and China that once scooped up U.S. debt are shunning it. In 2009, such foreign purchases of U.S. debt amounted to 6 percent of GDP and has since falled by over eighty percent to a paltry 0.9 percent.


http://www.moneynews.com/Headline/fe...3/28/id/434106


And that is, in part, why the US rating has been whacked again at the knees.
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Old 04-07-2012, 05:13 AM
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Originally Posted by I Love Beer View Post
And all the idiots that get voted in are doing nothing about our fiat currency. Your boy romney, obama, santorum, gingrich are all a bunch of fools. Wake up people, our monetary policy is a giant fail.
And at the same time Ron Paul was painted like an idiot equally by the Fox News morons and the CNN types. The truth of the matter is that the powers-that-be WANT the Nation to crumble. Think about... it's wonderful for the people that can take advantage of it. Not so good for everyone else.

Rock on.
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Old 04-07-2012, 05:34 AM
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Eyeball:

That's an interesting article about the Federal Reserve. As of last summer, the Fed had almost $3 trillion in "assets", $2.6 trillion of which is either US debt instruments or mortgage-backed securities. Where is their money coming from to buy more US debt?
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Old 04-07-2012, 07:59 AM
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[quote=yarcraft91;4508583
. Where is their money coming from to buy more US debt?[/quote]

Ummm, pull a bill out of your wallet and read what it says on it.
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Old 04-07-2012, 08:04 AM
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Originally Posted by My Turn View Post
Ummm, pull a bill out of your wallet and read what it says on it.
Are you referring to the part that says "Federal Reserve Note" or the part that says "worth less every day"?
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Old 04-07-2012, 08:10 AM
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Originally Posted by yarcraft91 View Post
Are you referring to the part that says "Federal Reserve Note" or the part that says "worth less every day"?
Are in the very small print......"Worth less than Monopoly money"
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