Spending putting US credit rating at risk

[Kratos]

It cannot be good news that the warnings from credit agencies about the US debt and deficit come almost monthly now. Moody’s, in its latest quarterly AAA Sovereign Monitor, examined the financial health of the four largest nations that have the ratings agency’s highest rank–the US, UK, France, and Germany. Although Moody’s said that none of the nations faced an imminent problem, it did warn that the countries have ”debt reversibility” trouble, which means that it is increasingly more difficult for them to pay down their national debt obligations.
“In light of the muted recovery, discretionary fiscal adjustment is now the principal means of repairing the damage that the global crisis has inflicted on government balance sheets,” Pierre Cailleteau, managing director of Moody’s Sovereign Risk Group, said in a statement according to MarketWatch. And, that is at the core of the problem in general and in the US in particular.

The American government is still for a deficit of over $1.5 trillion this year. If the economy does not recover, and with its tax receipts lackluster, the red ink could be as large again in 2011. The unemployment that creates low IRS collections also leads the government, at least based on its current philosophy, to ratchet up spending for the social safety net, including extended unemployment benefits.

The Administration and Congress jawbone the deficit issue, but there is no sign that they intend to do anything meaningful about it. Like almost all countries burdened by debt, the US hopes that rapid GDP expansion, which will happen at some point in the relatively near future, will cause tax receipts to fill the nation’s treasury again.

China’s premier Wen Jiabao recently spoke about a global double-dip recession as a possible outcome of the still-boiling financial crisis and high unemployment. Those are odd words from the mouth of a man who runs a nation which has nearly 10% GDP growth. But, even from Beijing he can see what Moody’s sees. The aggregate foreign debt of the world’s largest developed nations will grow for years.

http://247wallst.com/2010/03/15/mood...e-not-a-right/

[FranciscoG]

China’s premier Wen Jiabao recently spoke about a global double-dip recession as a possible outcome of the still-boiling financial crisis and high unemployment. Those are odd words from the mouth of a man who runs a nation which has nearly 10% GDP growth. But, even from Beijing he can see what Moody’s sees. The aggregate foreign debt of the world’s largest developed nations will grow for years.
http://247wallst.com/2010/03/15/mood...e-not-a-right/

There will be some major problems if China makes any of these moves.

1) Stops lending
2) Stops investing
3) Calls in any debts
4) Asks for higher interest rates
5) Pushed for the dollar to be replaced as the currency for oil

[Kratos]

There will be some major problems if China makes any of these moves.

1) Stops lending
2) Stops investing
3) Calls in any debts
4) Asks for higher interest rates
5) Pushed for the dollar to be replaced as the currency for oil

We don't have as much control of China as the media leads you to think. And they do their best to hide what they're doing.


http://www.google.com/hostednews/ap/...D7ALwD9DUITS80

[Kratos]

WASHINGTON (Dow Jones)--A bipartisan group of senators will introduce legislation Tuesday that would oblige the Obama administration to take reciprocal action against any country deemed to be manipulating its currency.

The bill will be introduced later Tuesday, but details of it were reviewed by Dow Jones Newswires.

The measure is primarily aimed at China, a country many congressional lawmakers believe is keeping its currency artificially low to boost its exports.

It would require the Treasury and the Commerce Department to implement several reactive steps against countries seen to be using its foreign exchange policy as a countervailing subsidy.

The law would replace the current framework, which gives the administration discretion when dealing with countries seen to be engaging in currency manipulation. Instead, it would apply an "objective test" that would require the administration to take action if a country failed it.

The bill was introduced by Sens. Charles Schumer (D., N.Y.), Debbie Stabenow (D., Mich.) and Sen. Lindsey Graham (R., S.C.).

It comes a day after the House Ways & Means Committee announced plans to convene a hearing into the Chinese currency situation in two weeks' time.

The rising tide of anger in Congress toward China's utilization of its currency as an economic weapon places the Obama administration in a difficult bind.

President Barack Obama himself has said he believes the government is manipulating its currency, as has his Treasury Secretary Timothy Geithner.

But China is among the nation's largest creditors, owning around $550 billion in the country's foreign-held debt. Increasingly, it is also one of the U.S.'s most significant trading partners.

Given the shortened congressional calendar due to the November elections, the legislation is unlikely to be passed into law this year. But the administration will continue to be confronted with the issue by lawmakers until it determines its policy on the matter.

For its part China has responded by accusing the U.S. of also trying to weaken the dollar to increase its exports.

http://online.wsj.com/article/BT-CO-...atestheadlines

[Kratos]

If we aren't going to let them manipulate currency anymore...why would they stock pile our debt over any other?

I'm against China's currency policy, and doing business unless they play by the same rules. But the US is so fiscally irresponsible, a major reduction in debt purchase could send us into an inflationary spiral that we may never recover from.

[FranciscoG]

There is an old mexican saying that goes something like this ¨There is no coming back from a cut off head¨

The problem is the surplus of the 1990s is gone. From 2000 till now there has been spending upon spending.

And it is not just one thing. Its not the billions of $ every month on wars. Its just that the US spends 50% of the world funds attributed to military techs.

Its not that the criminal justice system is broke. Its not just that there were are edging toward 3,000,000 people in prisons and 8,000,000 on probation or parol.

Its not just welfare.

Its all broke. And there is no coming back when your head is cut off.

[Kratos]

Spending just keeps going up.
there was never a budget surplus...it was more of an accounting trick
although outlays were exceeded by recipts breifly
new debt was consistantly being taken on at a greater rate and being booked into the budget.

the internet boom economy was expanding faster than clinton was increasing spending. So, he had the actual deficit very low at one point (between 100-200 million). We haven't actually decreased, or paid down the deficit since post WWII.

gvt is a growth industry
until we are willing to shrink it's share of the economy, the private sector will no longer be able to fund the public sector.