Tag Archives: Depression

News

Egan Jones cuts U.S. credit rating again, this time from AA to AA-

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Story from CNBC.

Excerpt:

Ratings firm Egan-Jones cut its credit rating on the U.S. government to “AA-” from “AA,” citing its opinion that quantitative easing from the Federal Reserve would hurt the U.S. economy and the country’s credit quality.

The Fed on Thursday said it would pump $40 billion into the U.S. economy each month until it saw a sustained upturn in the weak jobs market.

In its downgrade, the firm said that issuing more currency and depressing interest rates through purchasing mortgage-backed securities does little to raise the U.S.’s real gross domestic product, but reduces the value of the dollar.

In turn, this increases the cost of commodities, which will pressure the profitability of businesses and increase the costs of consumers thereby reducing consumer purchasing power, the firm said.

In April, Egan-Jones cuts the U.S. credit rating to “AA” from “AA+” with a negative watch, citing a lack of progress in cutting the mounting federal debt.

Moody’s Investors Service currently rates the United States Aaa, Fitch rates the country AAA, and Standard & Poor’s rates the country AA-plus. All three of those ratings have a negative outlook.

Could this have anything to do with the decision to print $40 billion a month to “stimulate” the economy? Once you’ve given up on letting businesses create jobs by lowering their taxes and removing burdensome regulations, then printing money is all you have left. But no one mistakes that for economic growth, least of all credit rating agencies.

News

CBO: If Bush tax cuts are not renewed, America is headed for another recession

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From the Heritage Foundation.

Excerpt:

About 1.6 million American jobs hang in the balance. That is the clear implication of analysis contained in the annual budget update by the Congressional Budget Office (CBO).

Along with all manner of dire and dreary budget data reflecting President Obama’s budget and economic policies to date, CBO provides its assessment of what would happen if the President and Congress sit on their respective hands and fail to defuse the threats of Taxmageddon and the fiscal cliff. The answer is fairly simple: recession.

As CBO so diplomatically put it, “such fiscal tightening will lead to economic conditions in 2013 that will probably be considered a recession.”

Taxmageddon is the $500 billion tax hike slated to take effect on January 1, while the fiscal cliff consists of Taxmageddon plus various spending reductions—among them the sequestration left over from the disastrous negotiations that led to the Budget Control Act in 2011.

According to CBO’s analysis, if Congress defuses Taxmageddon and the fiscal cliff, then the economy will grow at a tepid 1.7 percent in 2013 and the unemployment rate will remain stuck around 8 percent. But if President Obama and Congress play chicken with Taxmageddon and fail to act, then the economy will contract by about 0.5 percent and the unemployment rate will shoot up to 9.1 percent, about halfway back to the peak from the past recession.

Forget percentages—what does this mean in actual jobs lost if President Obama and Congress fail to act? It means roughly 1.6 million more Americans will be out of work—on top of the 12.8 million who already want to work but can’t find jobs.

Just about every relevant school of economics, from the President’s pure Keynesianism to supply-side and neoclassical persuasions, tells much the same tale on net: Raising tax rates on a weak economy produces a weaker economy. It’s not terribly complicated.

Here’s my advice: This time, let’s elect someone with someone with experience in business administration and economics.

News

Ratings agency Moody’s downgrades 15 banks, some by two notches

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From Yahoo News.

Excerpt:

Ratings agency Moody’s downgraded many of the world’s biggest banks on Thursday, lowering credit ratings of 15 companies by one to three notches.

Morgan Stanley, one of the most closely watched firms, had its long-term debt rating lowered by just two notches, one level less than had been expected, and its stock rose in after-hours trading. The downgrade left Morgan Stanley more highly rated than Bank of America Corp and Citigroup but a step below Goldman Sachs Group.

Credit Suisse , which last week was warned about weak capital levels by Switzerland’s central bank, was the only bank in the group to suffer a three-notch downgrade. But its new A1 deposit and senior debt ratings, however, rank higher than many of its peers.

[…]In addition to Morgan Stanley, downgraded by two notches were Barclays , BNP Paribas , Royal Bank of Canada , Citigroup, Goldman Sachs Group, JPMorgan Chase , Credit Agricole , Deutsche Bank , and UBS .

Falling one notch were Bank of America, HSBC Holdings , Royal Bank of Scotland and Societe Generale.

Nomura and Macquarie were included in an original list of global banks, but have already been downgraded.

I don’t think that the Obama administration should be so concentrated on legalizing gay marriage and subsidizing green energy right now. I also think that if you are going off to college, you would do well to study a STEM field. There’s a storm coming.