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Post by jdredd on Aug 6, 2011 3:57:27 GMT -5
www.bloomberg.com/news/2011-08-06/u-s-credit-rating-cut-by-s-p-for-first-time-on-deficit-reduction-accord.html"S&P lowered the U.S. one level to AA+ while keeping the outlook at “negative” as it becomes less confident Congress will end Bush-era tax cuts or tackle entitlements. The rating may be cut to AA within two years if spending reductions are lower than agreed to, interest rates rise or “new fiscal pressures” result in higher general government debt, the New York-based firm said yesterday." "S&P’s action may hurt the U.S. economy over time by increasing the cost of mortgages, auto loans and other types of lending tied to the interest rates paid on Treasuries. JPMorgan Chase & Co. estimated that a downgrade would raise the nation’s borrowing costs by $100 billion a year. The U.S. spent $414 billion on interest expense in fiscal 2010, or 2.7 percent of gross domestic product, according to Treasury Department data." Even with the accord, S&P said the U.S.’s debt may rise to 74 percent of gross domestic product by year-end, to 79 percent in 2015 and 85 percent by 2021. "S&P also changed its assumption that the 2001 and 2003 tax cuts enacted under President George W. Bush would expire by the end of 2012 “because the majority of Republicans in Congress continue to resist any measure that would raise revenues.” "The committee of bond dealers and investors that advises the U.S. Treasury said the dollar’s status as the world’s reserve currency “appears to be slipping” in quarterly feedback presented to the government on Aug. 3." So we have world investors telling us we need to raise taxes. How do you feel about them now?
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Post by jdredd on Aug 7, 2011 1:41:55 GMT -5
www.thenation.com/blog/162555/it-time-downgrade-rating-agencies"So by almost all accounts inside the beltway, a downgrade in the federal government’s credit rating would be catastrophic. But a closer look at who issues these ratings, how they do it, and the real-world impact of these ratings tells a different story. The first clue that these ratings might not be highly calibrated, serious indicators of creditworthiness can be found in the 2008 economic collapse. The financial products created by Wall Street that were full of toxic mortgage securities were all blessed with gold-star ratings as safe investments from the country’s three main credit ratings agencies, Moody’s, Fitch and Standard and Poor’s. These products were so awful as to destroy Lehman Brothers, threaten many other trading firms, and plunge the economy into recession, but the rating agencies consistently told investors they were safe. As William Greider has noted here, this essentially made the rating agencies “unindicted co-conspirators” in the collapse." " Contrary to Tea Party hysteria, the United States’ debt burden is perfectly manageable. Robert Pollin, a professor of economics at the University of Massasetts and co-director of the school’s Political Economy Research Institute, noted in an e-mail that the single most significant statistic in evaluating US government debt is the debt servicing burden, meaning that amount of interest payments the government faces relative to annual outlays. In 2010, interest payments on the debt were 5.7 percent of total government spending. Pollin noted the average for that ratio between 1950 and 2010 was 9.8 percent, meaning that our current debt burden is half the historical average. So why the panic from rating agencies? Once again, it might come down to good business, not good economics. “The best I can come up with is, in the end, they simply regurgitate what they see as a respectable opinion,” Pollin said. “They do this because they are eager to themselves be seen as responsible and respectable to the people who deliver conventional wisdom. The rating agencies depend on such people for their business.”
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Post by jdredd on Aug 7, 2011 1:46:49 GMT -5
www.thenation.com/blog/162605/downgrading-democracy"The real reason for dismissing S&P’s intervention, however, is more fundamental. The ratings firm has set itself up as an arbiter of American politics, arguing that it is “pessimistic” about the ability of American politicians to sort out differences. “The political brinksmanship of recent months highlights what we see as America’s governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed,” the firm wrote in its announcement. “The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy. Despite this year’s wide-ranging debate, in our view, the differences between political parties have proven to be extraordinarily difficult to bridge.” No doubt, recent developments in Washington inspire “pessimism.” Polls suggest that most Americans are fed up with politicians in both parties, and of just about every ideology. But that frustration, that anger, is a good thing. It will, hopefully, inspire a political revolt against the real manipulators of the economic and political process— the hedge-fund managers and extremist billionaires who faked up the Tea Party movement and fund myriad anti-tax, anti–public education, anti–public services and anti-regulation “think tanks,” lobbies and “independent” political groups.
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Post by jdredd on Aug 8, 2011 16:07:24 GMT -5
money.cnn.com/2011/08/08/markets/markets_newyork/index.htm?iref=BN1&hpt=hp_t1"NEW YORK (CNNMoney) -- Wall Street had its worst day since the 2008 financial crisis, as fearful investors reacted to the United States losing its coveted AAA credit rating. All three major U.S. stock indexes sank between 5% and 7%, pushing the Dow below 11,000 for the first time since last November. U.S. stocks have fallen 15% during the past two weeks. Though observers said S&P's downgrade shouldn't matter all that much, the market wasn't buying it. "Investors are having one reaction to the downgrade: sell first and ask questions later," said Paul Zemsky, head of asset allocation with ING Investment Management." How many billions of dollars in virtual worth has the stock market lost today? All because the US was downgraded by one ratings agency? What a system...
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Post by jdredd on Aug 10, 2011 17:27:42 GMT -5
www.bbc.co.uk/news/business-14483260"So the more probable reason for the rout in European banks, which has depressed European stock markets and led to contagion on Wall Street, is simply those very basic emotions that afflict investors from time to time (especially recently): fear and capitulation." Yep, being wealthy is tough at times...
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Post by jdredd on Aug 24, 2011 3:14:50 GMT -5
The Problem With Debt
Here's the way I see it as of August 24, 2011 at 1:02 AM:
Looking at things from a lender's (investor) point of view, lending money is a great moneymaking scam...up to a point. The problem is, you are betting that the lendee will be able to pay you back with interest. What do you do when you suddenly realize that you've lent more money than the lendee is able to pay back?
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Post by dj on Aug 24, 2011 12:05:48 GMT -5
The Problem With Debt Here's the way I see it as of August 24, 2011 at 1:02 AM: Looking at things from a lender's (investor) point of view, lending money is a great moneymaking scam...up to a point. The problem is, you are betting that the lendee will be able to pay you back with interest. What do you do when you suddenly realize that you've lent more money than the lendee is able to pay back? Wow, that is super simplistic. So, congratulations for being "super" Lending is a time and value equation. I want to buy a house but don't have the time to save up $500,000. A lender sells me the "time" component. I buy the house now. The lender is getting paid interest which is just a fee for them now waiting 30 years to get all their money back. It's not a scam, it's simply a business transaction. The bank borrows from the Federal reserve to move the cash along, and pays a fee for that too. In fact, the bank borrows every day just to fill vaults and ATMs for their customers to conduct business. Car dealers can't buy one or two cars at a time with cash. They the lot by borrowing money. It is worth it to them to pay for the time component because they conduct business now and at a volume which allows them a living (not to mention their employees and contractors). And so on....
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Post by jdredd on Aug 24, 2011 12:32:22 GMT -5
The Problem With Debt Here's the way I see it as of August 24, 2011 at 1:02 AM: Looking at things from a lender's (investor) point of view, lending money is a great moneymaking scam...up to a point. The problem is, you are betting that the lendee will be able to pay you back with interest. What do you do when you suddenly realize that you've lent more money than the lendee is able to pay back? Wow, that is super simplistic. So, congratulations for being "super" Lending is a time and value equation. I want to buy a house but don't have the time to save up $500,000. A lender sells me the "time" component. I buy the house now. The lender is getting paid interest which is just a fee for them now waiting 30 years to get all their money back. It's not a scam, it's simply a business transaction. The bank borrows from the Federal reserve to move the cash along, and pays a fee for that too. In fact, the bank borrows every day just to fill vaults and ATMs for their customers to conduct business. Car dealers can't buy one or two cars at a time with cash. They the lot by borrowing money. It is worth it to them to pay for the time component because they conduct business now and at a volume which allows them a living (not to mention their employees and contractors). And so on.... Thanks for the compliment...I think. I do try to reduce things to their simplest level so even I might be able to understand. I think I understand your time and value equation. I admit "scam" is in the eye of the beholder, but for me there is more than enough monkey business going on in lending to call it a "scam". The direction I was heading in this was to try to shine a light on the present international debt crisis. It seems to me that the world's loan sharks lenders have suddenly realized they have over lent to the world's governments, and are now desperately seeking ways to ensure they will get repaid. So they are using their political clout (bought politicians) to squeeze governments to reduce all spending except for debt repayment, which means slashing the welfare state and draconian austerity measures. Even defense is on the chopping block (which must make the day of one of our biggest lenders, China). Which brings me also to our domestic political situation, and the rise of the T-party. I find it amusing that the TP types are aligning themselves with the international lenders, demanding austerity measures and the end of the welfare state. Are they the new "Useful Idiots"? Maybe not, but I'm still thinking on it.
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Post by jdredd on Sept 10, 2011 0:26:52 GMT -5
money.cnn.com/2011/09/09/markets/markets_newyork/index.htm?hpt=hp_t2NEW YORK (CNNMoney) -- Stocks ended sharply lower Friday, as bad news out of Europe kept piling up. The sell-off triggered the sixth weekly decline in seven weeks for the Dow and S&P 500. Reports said Germany is preparing to shore up its banks to protect them against a Greek default. If Greece's bonds become worthless, that can trigger capital-requirement problems, and a lot of major banks could go under, Saluzzi said. "The financial contagion could be pretty bad, so investors are getting out now and waiting to see how all of this will shake out," he added." As investors searched for safety, they fled risky investments like stocks and oil and rushed into U.S. Treasuries and gold. The 10-year yield fell to a record low of 1.89% from 1.99% late Thursday, and gold prices added $2, or 0.1% to $1,859.50. Investors also continued to mull over also Federal Reserve Chairman Ben Bernanke's speech delivered Thursday afternoon. Stocks ended sharply lower Thursday, as investors signaled disappointment that the Fed chief didn't offer any new solutions to the nation's economic slowdown.
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Post by jdredd on Sept 11, 2011 21:31:57 GMT -5
www.bloomberg.com/news/2011-09-11/papandreou-oks-taxes-cuts-to-dodge-default.htmlPrime Minister George Papandreou, vowing to avoid a default and keep Greece in the euro, approved new measures to help plug a yawning budget gap as resistance builds at home and in Europe to extending more aid to the European Union’s most-indebted nation. The Cabinet yesterday voted to cut one month’s wages from all elected officials and impose an annual charge on all property for two years, to be levied through electricity bills to ensure rapid collection, Finance Minister Evangelos Venizelos told reporters in the northern Greek city of Thessaloniki.
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Post by jdredd on Sept 20, 2011 2:57:59 GMT -5
money.cnn.com/2011/09/19/news/international/greek_default/index.htm?hpt=hp_t2NEW YORK (CNNMoney) -- Experts agree it's almost certain that Greece will not be able to pay all of its debts. But if the country does default, what happens next? Greek leaders are struggling to agree to a set of painful budget cuts, including layoffs and new taxes, in order to get the next round of bailout cash from its European partners. But Greece is in the midst of a painful recession, which is cutting tax collections and causing it to sink even deeper into the deficit hole. Meanwhile, investors trading in credit default swaps, which are essentially bets on whether or not there will be a default, are now pricing in nearly a 100% chance of default on Greek debt. A default in Greece could cause investors to flee the debt of other troubled European economies, including Portugal, Ireland, Italy and Spain. Investors trading in credit default swaps are now placing the chance of default in those countries at between 28% to 66%. "They can survive a Greek default. They can arguably survive if Portugal and Ireland go down as well," said Jay Bryson, international economist with Wells Fargo Securities. "But you include Italy and Spain, now we're starting to talk some real money here. You could easily be talking €1 trillion in writedowns. That would be a disaster." And a wave of European debt defaults will topple Europe into recession, which would hit a U.S. economy already at risk of falling into a double-dip recession. "European financial stress clearly has implications for the economic outlook outside the eurozone," wrote the economists at Goldman Sachs in a note Monday. "U.S. growth could be affected via three main channels: tighter U.S. financial conditions, decreased credit availability and weaker US exports." Why are credit default swaps even legal? I guess the same reason derivatives are.
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Post by jdredd on Sept 24, 2011 1:19:29 GMT -5
www.bloomberg.com/news/2011-09-22/greece-on-edge-of-biggest-insolvency-24-centuries-after-first-city-default.html"History’s first sovereign default came in the 4th century BC, committed by 10 Greek municipalities. There was one creditor: the temple of Delos, Apollo’s mythical birthplace. Twenty-four centuries later, Greece is at the edge of the biggest sovereign default and policy makers are worried about global shock waves of an insolvency by a government with 353 billion euros ($483 billion) of debt -- five times the size of Argentina’s $95 billion default in 2001." "The risk is that the rot spreads beyond Greece as investors begin dumping the debt of other cash-strapped European nations, said Ted Scott, director of global strategy at F&C Asset Management in London. Portugal and Ireland have already been bailed out, while speculators have also tested Italy and Spain. Italy, the world’s eighth-largest economy, has a debt of almost 1.6 trillion euros, while Spain, the 12th biggest economy, owes 656 billion euros."
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Post by jdredd on Sept 26, 2011 15:54:36 GMT -5
english.aljazeera.net/business/2011/09/201192613325929727.html"Faced with mounting anger from the country's international creditors, the government recently announced a raft of new austerity measures to secure the next $10.7bn installment of bailout loans from a massive rescue package it has been dependent on since last year. Without the new funds, Greece only has enough funds to see it through mid-October, when it faces the prospect of a messy default." Oooo...now the loan sharks investors are angry...what are they going to do, break Greece's legs?
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Post by jdredd on Oct 9, 2011 0:41:37 GMT -5
www.latimes.com/business/la-fi-fitch-20111007,0,1743940.story "Fitch Ratings downgraded its sovereign credit rating for Italy and Spain on Friday and said its long-term outlook for both countries was negative, citing high debt and poor prospects for growth. Separately, Fitch also said it was keeping Portugal's debt rating on watch for a possible downgrade, with a decision due by the end of the year. Portugal was the third and latest Eurozone country to receive an international bailout package after Greece and Ireland." In our globalized world, these unelected rating agencies have become more powerful than nations...
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Post by jdredd on Oct 9, 2011 23:13:51 GMT -5
www.latimes.com/business/la-fi-funds-europe-20111009,0,2445474.story "For investors, this summer was no European vacation. Over the last few months the continent's stock markets suffered their worst plunge since the economic crash of 2008. While U.S. stock mutual funds that track the blue-chip Standard & Poor's 500 index lost 14% in the third quarter, the average European stock fund sank 23%, according to data firm Lipper Inc. Americans have become big believers in global investing in the last decade, pumping record sums into foreign stock funds even as they've fled many U.S. stock funds. Now, their resolve is being put to the test, as the debt crisis that began in Greece two years ago threatens to engulf Europe's biggest economies. Many U.S. investors who own diversified international stock funds, such as through 401(k) retirement savings plans, may not realize how much of their money is invested in Europe. The average diversified foreign fund has about 55% of its assets in Europe, according to Lipper." Poor, poor, rich investors...makes you cry, doesn't it? Of course, gambling is gambling.
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