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Jerry Aragon Ph.D (Phunny humor Doctor)

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WAKE UP AMERICA! Credit Rating Lowered!
by Jerry Aragon Ph.D (Phunny humor Doctor)   
Rated "G" by the Author.
Last edited: Friday, January 27, 2012
Posted: Saturday, August 06, 2011

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The United States credit rating has dropped recently from a AAA to a AA rating. In my view, American's have been in a coma for the last 40 years, and they'd better wake up and smell the coffee, and tell the Congress to stop all this unnessary spending before we all drown in red ink!

I'm not an economist, but I think this lowering of the credit rating of the United States, can be good...because it will serve as a wake-up call to all American's, that we're sinking in debt, and we're drowning in red ink, and we have to reverse our habit of spend; spend; and more spend!

The American people have to get on the U.S. Congress, to stop all this spending and get the budget under control before we are all involved in a train wreck!  There's a line in the sand for everything, and we've just crossed that line, and all Americans are going to pay dearly, unless we get back over the line and keep the budget in line, etc.

The following article was written by Zachery Goldfarb of the Washington Post, and the piece was published in the Albuquerque Jounal on August 6, 2011.  The headline reads; 

"U.S. Credit Rating Lowered: 
 Nation's Debt Downgraded For First Time In History" 

"Standard and Poor's announced Friday night (August 5, 2011) that it has downgraded the credit rating of the United States for the first time, dealing a symbolic blow to the world's economic superpower in what was a sharply worded critique of the American political system."

My-Two Cents; (comment/opinion);
I think this is good news for the American people, because the American people are fed up with all the bickering in the Congress by the Democrats and the Republicans over Party politics.  There is endless grid-lock in Washington between the two Parties, and it has to stop...and stop NOW!

The article continues...

"Lowering the nation's rating to one notch below AAA, the credit-rating company said "political brinksmanship" in the debate over the debt had made the U.S. government's ability to manage its finances "less stable, less effective and less predictable."  It said the bipartisan agreemant reached this week to find at least $2.1 trillion in budget savings "fell short" of what was necessary to tame the nation's debt over time and predicted that leaders would not be likely to achieve more savings in the future. 

"It's always possible the rating will come back, but we don't think it's coming back anytime soon," said David Beers, head of S&P's sovereigh debt rating unit.  The decision came after a day of furious back and forth debate between the Obama administration and S&P Government officials fought back hard, arguing that S&P's analysis of the potential for political agreement was flawed and that its initial report, which was flagged by the Treasuary earlier in the day, contained mathematical errors.  The company had overstated the U.S. deficit over 10 years by $2 trillion. 

'A judgement flawed by a $2 trillion error speaks for itself,' a Tresury spokesman said Friday.  The downgrade to AA+ will push the global financial markets into uncharted territory after a volative week fueled by concerns over a worsening debt crisis in Europe and a faltering economy in the United States. 

The AAA rating has made the U.S. Treasury bond one of the world's safest investments...and has helped the nation borrow at extraordinarily cheap rates to finance its government operations, including two wars and an expensive safety net for retirees. 

Treasury bonds have also been an island of stability amid the economic upheaval of the past few years.  The nation has had a AAA rating for 70 years.  Analysts say that, over time, the downgrade could push up borrowing costs for the U.S. government, costing taxpayers tens of billions of dollars a year.  It could also drive up interest rates for consumers and companies seeking mortgages, credit cards and business loans.

The downgrade could also have a cascading series of effects on states and localities.  these governments could lose their AAA credit ratings as well, potentially raising the cost of borrowing for schools, roads and parks.  But the exact impact of the downgrade won't be known until at least Sunday night (August 7, 2011), when Asian markets open, and perhaps not fully grasped for months.  Analysts say the initial effect on the markets may be modest because they have been anticipating an S&P downgrade for weeks.

Federal officials are also examining the impact of downgrade in large but esoteric financial markets where U.S. government bonds serve an extremely important function.  they were generally confident that markets would hold up, but were closely monitored the situation.  Regulators said that the downgrade would not affect how banking rules treat Treasury risk-free assets. 

The ratings action immediately fueled partisan wrangling Friday night.  Allies of President Barack Obama said it underscored his call for a 'grand bargain' that would trim $4 trillion from the federal budget involving a mix of revenue and spending cuts.  Repulicans criticized Obama's handling of the economy. 

My Two-Cents: (comment/opinion)
This is the kind of wrangling and gridlock the American people are fed up with.  The boat is taking in water and sinking and the Democrats and Republicans are arguing!

"'Standard & Poors rating downgrade is a deeply troubling indicator of our country's decline under President Obama," Republican presidential candidate Mitt Romney said.  S&P has angered government officials with aggresive warnings over the past few months of a potential downgrade.  Those warnings, so far, have not worried government bond markets. 

What's more, the two other major credit rating companies, Moody's Investors Service and Fitch Ratings, have said they would preserve the nation's AAA ratings for now.  S&P downgrade was as much a political critique as a financial conclusion.  It is based on a view that American political leaders would be unable to come up with at least $4 trillion in savings, which is needed to bring the nation's debt to a manageable level over the next decade. 

The debt deal swung earlier this week proposed spending cuts in two phases.  Democrats and Republicans agreed to the first round, worth nearly $1 trillion.  But a congressional committee must decide the remaining $1.2 trillion to $1.5 trillion, and S&P questioned whether that would ever happen.

S&P added that it expects that the upper-income experts Bush-era tax cuts will continue, despite vows from Obama to end the breaks next year.  'The majority of Republicans in Congress continue to resist any measures that would raise revenues,' the firm said.  S&P's downgrade served as an indictment of the gridlock that sent the nation to the edge of defaulting on its debt obligations.  It is also striking in part because it reflects the tremendous power of a small group of financial analysts employed by a New York company part of McGraw-Hill.  In Europe, political leaders have taken aim at credit rating companies when they cut the ratings of governments struggling with heavy debt burdens. 

S&P said the nation could suffer additional downgrades later on if the nation's debt burden grows worse.  'A new political consensus might, or might not, emerge after the 2012 election, but we believe that by then, the government debt burden will likely be highte,' the firm said. 

The company said the United States financial position was diverging from that of other AAA countries, including Canada, France, Germany and Britian.  Countries with a AA+ rating include New Zealand and Belgium.  Among those countries with a AA rating, one notch lower, are Bermuda, Spain and Qatar."


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