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With Treasury prices already plunging and yields already soaring, Moody’s just added fuel to the fire by warning it could move a step closer to cutting the U.S. government’s credit rating if President Obama’s tax and unemployment benefit package becomes law.
The credit rating agency estimates that the cost of funding the tax bill would be between $700 billion and $900 billion and would raise the government’s debt-to-GDP ratio to a staggering 73 percent.
Meanwhile, even while Congress is receiving these new warnings, we just learned that our representatives are still spending money like a pack of drunken sailors. Get this …
- In addition to the $800 billion in Fed funny money that Bernanke is creating out of thin air …
- And in addition to the President’s massive bill that, among other things, extends the Bush tax cuts and unemployment benefits …
- The U.S. Senate is about to vote on a new 1,924 page, $1.2 trillion omnibus spending bill that contains SIX THOUSAND, SIX HUNDRED EARMARKS!
The pork in this new omnibus spending bill is staggering: There are 30 pages of earmarks for the Defense Department … 90 pages of earmarks in the Transportation, Housing and Urban Development section … and 98 pages in earmarks under the Labor, Health and Human Services section.
There’s even a $450 million earmark to develop a second engine for the Joint Strike Fighter, which the Pentagon says it doesn’t want or need and has called a waste of money!
There’s no doubt about it: 2011 is going to be one of the most eventful years ever for the U.S. economy and for investors. The only question that remains is, how will this public debt crisis impact YOUR investments?
Best wishes,
Mike Larson
{ 4 comments }
Moodys, S&P and Fitch should have downgraded our federal government’s credit rating years ago.
They have watched the government’s debt increase every year since 1957 and as the resulting debt and unfunded liabilities grew ever larger, watched the government enact revenue-reducing tax cuts and increase spending funded by additional borrowing. So for years the AAA credit ratings have been pseudo ratings and anyone with any reasonable fiscal intelligence has long known that the government’s bonds are a high-risk investment relative to the safety of bonds of other more responsibly governed/managed countries and institutions. I sure don’t own any U.S. bonds and haven’t for a very long time.
Thanks, M&M, for reporting Moody’s warning. Apparently it was issued Tuesday but it wasn’t reported in my Wednesday morning newspaper (NC’s largest). Nor have I heard it on NPR or seen it from the Associated Press, etc. I shouldn’t be surprised at its ho-hum reception. The government’s debt problem was barely mentioned during the recent election campaign and I don’t recall the state of the debt (and its interest expense) ever being mentioned during any presidential State of the Union addresses. We should be demanding that President Obama do so next month.
“our representatives are still spending money like a pack of drunken sailors”.
I wish to take issue with this analogy, if I may. See, drunken sailors are only spending their own money. To compare the actions of our representatives to drunken sailors is a grievous slander on the sailors! I do not know of any of group to make the analogy with, to be honest. I doubt that even a corrupt televangelist will fit this bill.
Well, let’s see now, Martin and Co.:
Weiss has long, and quite rightly, deplored Moodys, because they (like nearly all other rating agencies) have and continue to rate companies from whom they take payment for their ratings, and those fraudulent and conflict-ridden ratings directly facilitated the current financial cricis. And, Moodys is now threatening to downgrade its “ratings” of U.S. debt? Give us a break, Martin and Co, and get off the political soapbox! Don’t you think this is worthy of “deeper” comment?
Maybe the U.S. Government has not paid its Moody’s “ratings bill”. And too, if not the U.S. Government, to whom should we look for any political and economic stability here in the US of A. Moodys, Goldman Sachs and the other financial orgainzations? How readily do we think even our gold shares, on the paper books of some financial organization, however “historically stable”, will be convertable into usable cash, when things get, even marginally, bad.
Look, we all know that this entire, insufficiently regulated, financial system is a farce, that is long overdue for a massive, and likely destabilizing; and, if U.S. debt and financial futures are a bad investment, how bad an investment is foreign debt, or relying on the honest delivery of U.S. financial orgs., including Weiss?