Tag Archives: Treasury Bonds

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

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.

QE3: Obama ushers in hyperinflation with more “quantitative easing”

Investors Business Daily explains Obama’s latest desperate ploy to cover up his economic failures.

Excerpt:

The Federal Reserve announced a third round of quantitative easing Thursday afternoon, and it is big: A net $40 billion a month in additional purchases of mortgage-backed securities. And policymakers said additional accommodation will continue “for a considerable time after the economic recovery strengthens.”

[…]Ordinary Americans can expect to see higher gasoline prices. Quantitative easing also pushes up commodity prices — both by boosting demand for financial assets and by weakening the dollar.

Crude oil prices have been trending higher, and were up $1 to nearly $98 a barrel in mid-afternoon trade.

That will quickly filter down to gasoline prices at the pump. Gas prices moved back to $3.847 a gallon last week, the highest since April. They’ve risen for 10 straight weeks in part on anticipation that QE3 was coming. Gas prices could once again threaten the $4 level — it’s already well over that mark in California. And that’s with no major supply issues or feared disruptions around the world.

Higher oil and gas prices also could push food prices higher, by encouraging more corn burning to produce ethanol, as IBD’s Jed Graham recently noted. Corn prices are near record highs due to this summer’s historic drought.

The producer price index shot up 1.7% in August — the biggest jump in three years — on higher food and energy costs. Gasoline prices at the wholesale level exploded 13.6%. Food costs rose 0.9%, the most in nine months.

With job growth and wage gains so weak, higher food and gas prices will cut into consumers’ buying power on everything else. That will offset much of the modest QE3 benefits.

First and second round of quantitative easing:

Third round of quantitative easing:

It means they are going to print the money. There really is no difference between Barack Obama and Robert Mugabe when it comes to economic policy. The only thing stopping him is the Republican House and the conservative alternative media.

What does “quantitative easing” really mean?

There are some mild curse words in this, but it is the awesome. (H/T ECM and Lex Communis)

The video has gone the viral. It has the 600,000 views as of the 10 PM.

“Of course not, they are the Goldman Sachs. They make their money ripping off the American people”. LOL!

UPDATE: 24 hours later, and close to a million page views.

CBO: Budget adds 4.8 trillion to national debt, China worried

Hot Air has this:

In a new report that provides the first independent analysis of President Obama’s budget request, the nonpartisan Congressional Budget Office predicted that the administration’s agenda would generate deficits averaging nearly $1 trillion a year over the next decade$2.3 trillion more than the president predicted when he unveiled his spending plan just one month ago.

Tax hikes are mentioned here at the Competitive Enterprise Institute’s Open Market blog:

Obama’s budget would explode the national debt while increasing taxes. That’s the conclusion of the Congressional Budget Office, controlled by lawmakers who support Obama. “The President’s proposals would add $4.8 trillion to the national debt,” increasing “the cumulative deficit from 2010 to 2019 to $9.3 trillion.” The budget also adds $1.9 trillion in tax increases.

And the stimulus bill Obama claimed was needed to avert “disaster” and “irreversible decline“? It will shrink the economy over the long run, since its “increase in government debt is expected to displace or ‘crowd out’ . . . private capital.”

…The CBO’s conclusion confirms its earlier findings that the stimulus package will cut wages and the size of the economy in the long run, despite costing $800 billion. The stimulus package also gutted welfare reform.

The Heritage Foundation blog The Foundry has more. Here are just a few of their bullet points:

• He raises taxes not just on upper-income taxpayers as he promised, but on all Americans through his misnamed “climate revenues”, and as his budget indicates, this is just a starter program.

• The President calls for enormous increases in government spending on health care and climate change, but on a great many other programs.

• The CBO saw through perhaps the greatest chicanery ever in federal budgeting when President Obama first assumed the full costs of the operations in Iraq and Afghanistan in perpetuity, and then claimed he is cutting spending when he asserts a change in policy and those spending amounts disappear.

The more he spends, the more it looks like he’s going to have to print money to get out of this, or raise taxes on producers and destroy the economy completely. And all that makes China very, very worried. Here is an article from the leftist New York Times, headlined “China’s Leader Says He Is ‘Worried’ Over U.S. Treasuries”.

Excerpt:

The Chinese premier Wen Jiabao expressed concern on Friday about the safety of China’s $1 trillion investment in American government debt, the world’s largest such holding, and urged the Obama administration to provide assurances that its investment would keep its value in the face of a global financial crisis.

…Mr. Wen said he was “worried” about China’s holdings of Treasury bonds and other debt, and that China was watching United States economic developments closely.

If Obama prints more money, this would raise inflation and devalue the US currency, including the Treasury Bonds held by China.

But economists have cited several possible threats, led by the prospect that the dollar’s value will depreciate over time, lowering the value of China’s holdings.

“In the short run, the dollar is appreciating” because global investors see the American currency as a safe haven at a time of crisis, Bai Chong-En, who heads the economics department at Tsinghua University in Beijing, said in a telephone interview. “But we don’t know what’s going to happen in the long run. If the American stimulus package is financed mainly by borrowing, then that may affect the future value of Treasury securities.”

Some specialists also say that high inflation could erode the dollar’s value. Finally, some believe that China’s investment in American debt is now so vast that, should it need foreign exchange in some emergency, it would be unable to sell its Treasury securities without flooding the market and driving down their price.

“The only possibility, really, is that China will have to hold these bonds until maturity,” said Shen Minggao, the chief economist at Caijing, a Beijing-based business magazine. “If you start to sell those bonds, the market may collapse.

And Heritage Foundation is reporting that they are even talking about switching out of the US dollar as their reserve currency.

Sigh. I found an article by Victor Davis Hanson (H/T Stop the ACLU) where he explores why Obama is destroying the economy. He has three possible solutions, and he analyzes each of them.

  1. Clueless
  2. Not so clueless
  3. A mean streak

Personally, I vote for 1). And that goes for anyone voted for him. And I’ve read David Freddoso’s book, so that’s where I am coming from. But you can read the VDH article and make up your own mind.