Wednesday, September 19, 2012


"The United States had its AAA rating from 1917 until 2011."

In case you missed it, a credit rating agency has already downgraded the United States, again. The US as an investment has gone from AAA to AA and now as of this week to AA- according to the Egan Jones investment group.
The ratings agency said the Fed’s plan of buying $40 billion in mortgage-backed securities a month and keeping interest rates near zero does little to raise GDP, reduces the value of the dollar, and raises the price of commodities. “From 2006 to present, the US’s debt to GDP rose from 66% to 104% and will probably rise to 110% a year from today under current circumstances; the annual budget deficit is 8%,” Egan-Jones said in a note. “In comparison, Spain has a debt to GDP of 68.5% and an annual budget deficit of 8.5%.”
Although not as large as Moody's or Standard&Poor's, this is a credit downgrade of the United States by a major agency.
Now, this is something the press is studiously ignoring, and it isn't gigantic news, but it is news. And the bigger credit agencies will be doing the same thing soon if there isn't a major change in the policy of the federal government.  The fact is, a nation that has more debt load than Gross Domestic Product is a horrible investment.  I would be skeptical of investing in the United States, too.  In fact, if I had a lot of money I'd be divesting from banks and stocks and buying tangible, valuable goods to store away right about now.
But the fact that this is getting virtually no attention - even from blogs - is pretty significant.  I wouldn't have even seen it were it not for Dustin Stockwin's site.  Long time readers know that I don't think bad economic news should be overemphasized, but neither do I think it ought to be ignored.
But you know the pattern by now.  If it bleeds, it leads... unless it hurts a Democrat.

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