Posted on 02/09/2018 9:03:44 AM PST by SeekAndFind
From Tyler Durden: Back in 2011, Standard & Poors’ shocked the world, and the Obama administration, when it dared to downgrade the US from its vaunted AAA rating, something that had never happened before (and led to the resignation of S&P’s CEO and a dramatic crackdown on the rating agency led by Tim Geithner).
Nearly seven years later, with the US on the verge of another government shutdown and debt ceiling breach (with the agreement reached only after the midnight hour, literally) this time it is Warren Buffett’s own rating agency, Moody’s, which on Friday morning warned Trump that he too should prepare for a downgrade form the one rater that kept quiet in 2011. The reason: Trump’s – and the Republicans and Democrats – aggressive fiscal policies which will sink the US even deeper into debt insolvency, while widening the budget deficit, resulting in “meaningful fiscal deterioration.”
In short: a US downgrade due to Trumponomics is inevitable. And incidentally, with today’s 2-year debt ceiling extension, it means that once total US debt resets at end of day – unburdened by the debt ceiling – it will be at or just shy of $21 trillion.
We expect if not a full downgrade, then certainly a revision in the outlook from Stable to Negative in the coming months.
Here’s Moodys:
The stable credit profile of the United States (Aaa stable) is likely to face downward pressure in the long-term, due to meaningful fiscal deterioration amid increasing levels of national debt and a widening federal budget deficit. However, the US economy is very strong, wealthy, dynamic and well diversified, and its role in the global financial system is unmatched. These factors help compensate for the impending fiscal weakness, Moody’s Investors Service says in a new report.
Moody’s has already indicated that rising entitlement costs and rising interest rates will cause the US’s fiscal position to further erode over the next decade, absent measures to reduce those costs or to raise additional revenues. The recently-agreed tax reform will exacerbate and bring forward those pressures.
Moody’s current baseline forecast is that the sovereign balance sheet will continue to weaken over the coming decade. Absent corrective fiscal measures, the US’s Aaa rating will rely increasingly on its unparalleled economic base and the central role it plays in the global financial system.
The US economy’s dynamism, competitiveness, rich resource endowment, high income levels and relatively supportive demographic trends underpin its economic strength. While evidence of declining growth potential, coupled with emerging aversion to open trade and foreign labor during a period of rising global competition, suggest that this level of relative strength could erode over time, we expect the US’ broad economic strength to support its credit profile for the foreseeable future.
Moreover, the role of the US dollar in global financial markets and the depth and liquidity of the US treasury market remove all but the most extreme government liquidity and balance of payment risks. They insulate the US from external shocks and shifts in financing conditions in a way not seen with other sovereigns.
Moody’s research subscribers can access this report, “Preeminent financial, economic position offsets weakening government finances”, at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1108357
The SPDR S&P 500 ETF Trust (SPY) was trading at $260.36 per share on Friday morning, up $2.73 (+1.06%). Year-to-date, SPY has declined -2.44%.
SPY currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 143 ETFs in the Large Cap Blend ETFs category.
The “Misery Index”, “Stagflation”, around the block gas lines during the oil embargo, Iran embassy fiasco (along with the failed “rescue attempt”), the windfall profits tax. So many memories of Jimmah Cahtah’s time in office.
This is a natural result of interest rates being too low for too long. No administration wants to be the bogey man blamed for rising rates and the past several administrations set the stage for this to occur in Trump’s first term. He’ll deal with it. For those who like debt instrument investments, chops-licking may be occurring.
Moody’s got downgraded in 2008 to lyin sacks of shiite
If you don’t think that Moody’s didn’t opine this for PAY, then I got a bridge to sell you...
Moody’s is totally corrupt.
Only 1 president and 9 years too late.....
> theres no way in hell the U.S. government should have been considered a default risk <
True enough. The U.S. government will never default. But what’s the alternative to a default? They will never rein in spending. So the only alternative is to - eventually - crank up the printing presses. Pay back those loans with devalued money.
So yeah, I’d downgrade U.S. credit on that basis alone.
Are you suggesting that a U.S. treasury bill is closer to Bitcoin today than it was yesterday in terms of default risk? Hardly.
Right now everything is rather stable. Offer me a 10 year Treasury bond at 4%, and I’ll think about it. Because that 4% is a safe 4%, and it will keep me ahead of inflation.
But how long can that stability last? Every year the U.S. government adds more and more to its debt. Eventually something has got to give. Not this year or next, but eventually.
I’d downgrade a company that was in such a position. It wouldn’t be much of a downgrade. But it would be a downgrade.
8 years of massive debt from a demo_rat President and not a word from Moody’s. Now, with a Republican as the President, they talk of downgrading.
Horrible people, those liberals.
JoMa
Most deep state.
>
“rising entitlement costs”
Easily corrected by means testing:
Keep the tax rates the same (credit side) but only pay one person $20 a year (debit side).
>
Dog squeeze! Means testing = ‘not even the common decency of a reach-around’.
Easily corrected by terminating the unlawful, illegal, unconstitutional Ponzi schemes.
For a supposed (C) forum, peeps sure do love ‘em some Socialism.
It should with this irresponsible budget.
you may be right; I thought it was Moody’s.
He dumped Moody’s in 2007, right before the boom.
We need a massive cut in spending as well. 85% of the federal government needs to be eliminated ASAP.
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But we DO NOT NEED A CUT in Military Spending!!!!
What do you think Trump has been putting in place with the elimination of rules and regulations that were choking our economy?
Donald Trump is going to see that the American People GET WHAT WE PAY FOR!!! Just because the caps are lifted doesn’tmean it has to be spent. Lifting the cap on military spending was worth whatever it cost!!! Rand Paul and all his little anti-military cohorts need to disappear!!!
Blah blah blah.
The deep staters are EVERYWHERE.
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I agree! They have forgotten all the “EXPERTS” saying it was 99% sure Donald Trump would NOT win!!! The faint of hert need to shut up, sit down, and watch!
I remember all the experts who said it was impossible to fly a bomber off the deck of a carrier. Doolittle made them eat their words.
Fake.
8 yrs of zero interest and printing $$$?
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