S & P Credit Downgrade – next steps to take


Congress must return to rework our 10 year debt plan with immediate ( 2011 ) decrease in debt/GDP ratio. Anything less is treason. The Ryan plan with its 6 trillion 10 year cut would have maintained our AAA rating.

S & P warned Geithner of downgrade back in March and was very clear about what US needed to do. It is therefore incomprehensible BO admin had no written plan for next 4 months.

UK, Canada, Germany, France have all reduced their current and long term debt/GDP ratio and maintain their AAA. Unless we act soon foreign creditors will strongly favor their debt over ours. That will lead to dollar collapse and end life in US as we knew it for many years.

If a President wanted to formulate a plan to destroy the US economy in less than 3 years he could not have done better than BO.

As a 2008 Romney supporter I am amazed at his low key role during this debt debacle. Kudos to Bachmann for rejecting the April and August fraudulent debt compromises. I hope she has the insight to call all Congress back — may need to convince Boehner to take time off working on that tan.

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What will happen this week Aug 8-12? This is hard to predict. I believe many top tier investors factored in out deficit #’s subsequent to the debt deal Aug 2; they likely were closely following the turmoil in Europe especially Italy’s solvency. Hence the 10 year Treasury rate remained under 3%. However, with a greater focus on S & P’s analysis, second tier investors make take closer note of our long term deficit to GDP ratio and start balking at Treasuries. I guess the process will be gradual this week and next week so I expect the 10 year rate will return to the 3.25% to 3.50% rate we were at few months ago. After that, if there is still no progress in addressing our deficit, more investors will become convinced that the US is not serious in paying back our longer term debt. This may result in 8% or higher for the 10 year bond by the end of this year and increases our risk of a serious dollar collapse.

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About economics501

1 - free market Capitalist; 2 - Fitness Entrepreneur; 56 years old, VP at an Investment Bank in NYC, ex Venture Capitalist, happily married with 2 girls. Education: Rutgers and NYU. I allow Ted Hruzd, my friend to blog at will here. He has many posts here. I have known Ted since we were both students at NYU. Ted also works for an Investment Bank as a VP in Equity Global Markets. ------------------------- I was very very Socialist leaning as a 22 year old. I then strongly believed in Gov role in helping the poor. However, as a USDA Child Nutrition Programs, I personally accounted for millions of fraud, abuse, and waste of tax payer money. I came to believe that the poor would be best served with less Gov programs and more with direct aid via tax system. Then after 5 years I became a free market capitalist, was a venture capitalist in 2007 and helped start 2 high tech companies. I dedicate this site to champion free market capitalism as the best road to Prosperity. Please join in. If you disagree, fine, but please post with dignity and class and be civil. Argue with facts always.
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