Thread: Another US downgrade possible?

Tax reform in the US is one of the biggest problems, it always benefits those at the top the most the ones that need help the least. the tax acts in '97, 2001 and 2003 are one of the main reasons why we have an ever increasing budget deficit, with health spending being the 2nd leading cause. with the end of AMT and other items tax cheats are now hiding in offshore haven's further reducing federal income. when the new deal policy's were but in place they did not cause an increase in the deficit nor should they today. high taxes are not the problem but decreasing federal revenue and tax avoidance by large firms is, the tax haven act needs to be passed but that fuking asshole Grover and others won't allow it.

then there is the banking problem and the overvalued stockmarket. the balance sheets need to be cleaned out, the problem is that will cause some banks to go under and many to see drastic decreases in share prices. right now with an increase in the savings rate and banks not leading they are taking those deposits to gamble on wallstreet while they pay depositors less than 1% which is consumed by inflation and then some. this whole mess started "again" with banking deregulation in the 80's and was made consistently worst and worst by lobbying and further deregulation in 2000-2007. the FRB is lending at 0% right now, after the last banking collapse in the US in 1929 it took 30 years for interest rates to normalize, it will take longer this time. Corporate governance is weak and profit oriented. the fact that the USD is completely fiat right now is making change from reckless lending less likely. bankers could give 2 shits about the economy as their actions in the mid 2000's are proof positive...

the US is FUBAR

Possible, but not likely. Even though the US governments credit is worse than mine and yours, and they are technically bankrupt, the ratings agencies have incentive to cooperate.

Ratings agencies are a huge conflict of interest. Im going to pay you to rate my credit, and pay you to rate my bond underwriting, and if you rate it poorly HEY NO BIG DEAL, I'll keep paying you lol. NO. They are paid to rate the bonds, the ratings really don't mean anything as you saw AAA bonds down just as much as BBB in 2008. Lehman Brothers were AA lol.

Don't trust research reports, ratings agencies, it is like a company paying you to take and rate their gears, and if you rate them well you can do it again next year. Well of course you give a good rating for free gears next time. They give good rating so they are the agency of choice next time.

Originally Posted by ebn2002

Possible, but not likely. Even though the US governments credit is worse than mine and yours, and they are technically bankrupt, the ratings agencies have incentive to cooperate.

Ratings agencies are a huge conflict of interest. Im going to pay you to rate my credit, and pay you to rate my bond underwriting, and if you rate it poorly HEY NO BIG DEAL, I'll keep paying you lol. NO. They are paid to rate the bonds, the ratings really don't mean anything as you saw AAA bonds down just as much as BBB in 2008. Lehman Brothers were AA lol.

Don't trust research reports, ratings agencies, it is like a company paying you to take and rate their gears, and if you rate them well you can do it again next year. Well of course you give a good rating for free gears next time. They give good rating so they are the agency of choice next time.

ditto...

plus it's not like the FRB is going to increase the federal funds rate anyway not with the economy in the condition it's in so a credit downgrade is pretty much a moot point. the FRB actually learned from "one" mistake made in the late 1920's and that was NOT to increase interest rates during recession but to only increase the money supply.

First off, BoA doesn't put out ratings...second, when was anything BoA said or did in the past 3 years worth anything?

Also, only one rating agency gave us a downgrade (only after conceding a 2Trillion dollar error in their analysis, no big deal , right?)...does this mean the same rating agency downgrades us again? while the others hold firm? or do the others down grade making the initial downgrade credible?

This is Wall Streets tactics to force the USG and FED to meet the Tnote obligation and short term debt that is owed to them. I have no respect, faith, or confidence in the US rating agencies. They're just as corrupt and drunk off greed as the rest of the usual suspects on the eastern seaboard.

just sayin

I'm sure its bush's fault

Originally Posted by Dark Geared God

I'm sure its bush's fault

fuck that.....i blame Oprah for that dumb ni**er that's the POTUS....if she never helped out, he'd still be in the ghettos conning his own people to believe his bullshit.....

Originally Posted by irish_2003

fuck that.....i blame Oprah for that dumb ni**er that's the POTUS....if she never helped out, he'd still be in the ghettos conning his own people to believe his bullshit.....

i don't think your getting the joke

Originally Posted by Dark Geared God

I'm sure its bush's fault

the IMF report concluded that deregulation by sub-prime lenders during the years of 2000-2007 was a major contributing factor in the banking collapse. banking deregulation over the past 3-4 decades has made the economy more unstable in the US. the same thing has occurred in all countries that have deregulated banking over the decades with the US of course being on the extreme end of this practice but that is due to lobbying.

capitalism is only an economic system and is naturally flawed as capital always has more power over labor as world history has shown time and time again. economic policy that exaggerates this is simply adding fuel to the fire.

income growth under GWB was the lowest since the 60's with GHB having the 2nd worst record on income growth. there is typically a good 1 year lag between the effects of economic policy after it has passed before the effects are seen. the graph below is a perfect visual representation of economic policy that has been detrimental to the middle class, weakening the economy and real GDP growth.


GHB 1989-1993
GWB 2001-2009

Nonfarm Business Sector: Labor Share
Nonfarm Business Sector: Labor Share (PRS85006173) - FRED - St. Louis Fed

Bush Lead During Weakest Economy in Decades
http://www.washingtonpost.com/wp-dyn...011102301.html

It's more likely the U.S. will be upgraded than downgraded, assuming a stable government gets elected in 2012. The elimination of the Bush tax cuts will inject a lot of revenue. Further, 50% of Americans don't pay tax. Clearly there will be some major tax reform in the US over the next few years. If the Republicans get in, there will be some serious cuts and hurt; they won’t last a term. Then the Dems will tax. Either scenario will see eventual reduced debt and increased revenue, at least as it relates to GDP.

As for the middle class; that is a generational phenomenon. At the turn of the last century 25% of the income in the US was earned by the 1%. As a result of the industrial revolution and by 1978, that rate dropped down to 9%. Today the rate is 25% again. The middle class began to die in 1978, the height of the Union movement and the beginning of even bigger government. Since then, they've been borrowing to support their idea of what the American dream is supposed to be. There never really was a middle class; it was fabricated by the government. Today everyone believes they have a right to a job and we hear our politicians preach this every 4 years.

North Americans are going to hurt substantially for the next 10 years, those who are resourceful and don't take life for granted will do well. Many of the people occupying Wall Street will be look for something else to occupy their time and someone else to blame for their lack of resourcefulness. I hear food is rotting on Alabama farms right now because the unemployed middle class, who could do the work, refuse to stoop so low as to do the work of the fleeing Mexicans.

Originally Posted by vancouver

The middle class began to die in 1978, the height of the Union movement and the beginning of even bigger government. Since then, they've been borrowing to support their idea of what the American dream is supposed to be. There never really was a middle class; it was fabricated by the government. Today everyone believes they have a right to a job and we hear our politicians preach this every 4 years.

seems like you forget to factor in that since the 70's median home prices have increased 1,050%, median new car has increased 600%, college tuition rates have increased 500%, gas has increased from $.30/gal to over $3/gal, health care has gone from 1/10 of personal consumption expenses to 20% and over that same period of time the median income increased 450% but that was going from 1 to 2 full time wage earners. the median household income in 2010 with 2 full time wage earners is about $48K once adjusted for inflation this is about $1,000 more than what 1 male worker made working full time in the early 70's. at around $9,500 a year.

the changes that are going on in the US are exclusive to this country, they are not occurring in any other healthy industrialized wealthy countries in the OECD.

Originally Posted by LAM

seems like you forget to factor in that since the 70's median home prices have increased 1,050%, median new car has increased 600%, college tuition rates have increased 500%, gas has increased from $.30/gal to over $3/gal, health care has gone from 1/10 of personal consumption expenses to 20% and over that same period of time the median income increased 450% but that was going from 1 to 2 full time wage earners. the median household income in 2010 with 2 full time wage earners is about $48K once adjusted for inflation this is about $1,000 more than what 1 male worker made working full time in the early 70's. at around $9,500 a year.

the changes that are going on in the US are exclusive to this country, they are not occurring in any other healthy industrialized wealthy countries in the OECD.

You made my point for me. In the 60's and 70's there was a great demand for labor, thus wages rose to meet the demand. Wage inflation rose such that the top 1% only earned 9% of the national income by 1978; the deference between 25% and 9% is the peak of the middle class. By 1978, the U.S. completely industrialized and now the key to profits became corporate efficiency, not man power, thus businesses (the 1%) discovered new technologies to reduce the need for man power. By 2008, the national income earned by the 1% had returned to the pre-industrialized America.

House prices did increase substantially and this was of course cause by supply and demand. The baby boomers offspring were of age to buy homes and the supply was simply not there, nor was the money which is why interest rates sky rocketed. Prior to the 70's, home prices had not risen more than inflation and inflation had not outpaced incomes for 40 years. Now we are in the late 70's and early 80's. Businesses are running at full capacity, but the labour force is huge. There's no need for wage inflation because the supply of workers is much greater than the demand. One problem though, a job has now become a right and now government must do what it can to create jobs. They borrow money they don't have to build highways we don't need to employ workers who would otherwise not have jobs. They do this hoping businesses will invest and grow the economy. They fail to realize that businesses use real money and they see a lot further into the future than governments do or labour unions for that matter. Other government agencies, Fannie Mae and Freddie Mac are created to insure high ratio mortgages because now home ownership has become a right.

The 90's saw major technology advancement and more government spending to grow the economy. It worked for a while, but now it was the right of every American to own a BMW or SUV. Gas is going through the roof because Americans are diving their cars to the corner store, why, because it's the American way.

All the factors you mentioned are a consequence of government creating an artificial society and middle class. Hey, I think it's great that Western societies do what they can to manipulate economics in order to spread the wealth, but at the end of the day, Mr. Economy is like Mother Nature, you cannot control it. For thousands of years the world was made up of peasants and nobles (haves and have-nots). 80 years of middle class society is not going to impact the next 1,000 years greatly, not from a economic prospective. We are certainly more civilized today, but perhaps this will make for a less violent peasant and noble society going forward. I just count my lucky stars that I was born in this generation and I understand economics, demographics and politics just a little bit better than the average peasant. For 18 years, since I was 20, I've read every book I could get to understand social class divide and to get into a business that would be in great demand...

I could go on and on about how the U.S. government could fix our current challenges, but at the end of the day, the owness is on individuals to make their opportunity. Politicians are only interested in getting elected, at least these days.

I disagree with your analysis of other OECD countries, the same thing is going on, but just to a different degree. The challenges are maginified in the U.S., as they should be. The U.S. has always pushed the envelope; it's what still makers her the land of opportunity, even today.

Originally Posted by LAM

seems like you forget to factor in that since the 70's median home prices have increased 1,050%, median new car has increased 600%, college tuition rates have increased 500%, gas has increased from $.30/gal to over $3/gal, health care has gone from 1/10 of personal consumption expenses to 20% and over that same period of time the median income increased 450% but that was going from 1 to 2 full time wage earners. the median household income in 2010 with 2 full time wage earners is about $48K once adjusted for inflation this is about $1,000 more than what 1 male worker made working full time in the early 70's. at around $9,500 a year.

Thanx for the numbers, LAM.

I know the US has had fixd expense increases and wage declines, but is inflation included or excluded from these numbers?

For example, if inflation was averaging (as an example) at say, 3% per year for 40 years, would that mean a 300% per decade due to inflation (nominal dollars)?

Or, are these number adjusted for inflation? (Real dollars?)

the changes that are going on in the US are exclusive to this country, they are not occurring in any other healthy industrialized wealthy countries in the OECD.

This is a very dire sign.

those are not adjusted for inflation. even if say cumulative inflation since '85 is around 110-120%. all those costs far exceed the meager increases in real income growth and are at least 2x the rate of inflation.

depending on the level of education and job sector new workers that join the workforce during a recession also earn about 15-20% less over the course of the lifetime.

Originally Posted by LAM

those are not adjusted for inflation. even if say cumulative inflation since '85 is around 110-120%. all those costs far exceed the meager increases in real income growth and are at least 2x the rate of inflation.

depending on the level of education and job sector new workers that join the workforce during a recession also earn about 15-20% less over the course of the lifetime.

LAM,

Thanks for the clarification.

I agree.

One company downgraded the US further.

If you click the link and read then entire article (which is short) it notes that US debt is projected to (as we know):

Article:

Credit rating agency Egan Jones downgraded the United States Thursday on concern over the sustainability of public debt. Egan Jones is one of the most important ratings firms in the world; they lowered our credit level from AA+ to AA. The firm reduced America from AAA to AA+ in July 2011, just before Standard & Poor's did the same.

Another Credit Agency Downgrades US