US will lose AAA rating: PIMCO

[panzerfaust]

Source: Sydney Morning Herald (Oz)

Gross, the co-chief investment officer of Pacific Investment Management Co and manager of the Pimco Total Return Fund, which has $US154 billion in assets, earlier said that market declines on Thursday were due to investor fears that the United States is "going the way of the UK - losing AAA rating which affects all financial assets and the dollar."

Standard & Poor's on Thursday lowered its outlook on Britain to "negative" from "stable," threatening the nation's top AAA rating. Britain faces a one in three chance of a ratings cut as debt approaches 100 per cent of gross domestic product.

Read more: http://business.smh.com.au/business/us-will-lose-aaa-rating-pimco-20090522-bhtj.html

---

Is the answer more MBAs?

[ixion]

1. here it comes...

the sound of the other shoe falling.

[BlueJazz]

2. You See ?? As soon as those demorats get in power the country's rating falls apart.

;)

[ForrestGump]

3. Man, that sucks.

Where're we going to stay?

[tomm2thumbs]

4. But Fonzie gave America an 'Aaaaaaaaaaaaaaye' Isn't that better?

I'm surprised this wasn't already a given, but so be it.

[Psephos]

5. This cannot be allowed to happen

All kinds of grief cascades out of a downgrade. It will cause a run toward the RMB as the new reserve currency, which makes dollar-based commodities such as oil and metals jump in price. It will cause a major increase in the interest rate the govt must pay on deficit borrowing, which worsens the budget problems. It will cause a flight of capital from US companies, and that money will divert to Asia instead. It also will rip huge holes in perceptions of US leadership, and lessen US market and political influence. The vacuum will be filled by others less savory than the US.

Cut the effin' deficit NOW. And quit living on the equivalent of a national credit card. Ya hear me, Congress? You will on election day.

http://www.washingtonpost.com/wp-dyn/content/graphic/2009/03/21/GR2009032100104.html

This graph is already out of date, by the way. The latest projections are that the deficits will be even worse. We are turning into Zimbabwe.

[Yupster]

7. "Cut the effin' deficit NOW"

and I want a pony too.

:rofl:

[SOS]

10. Re: NOW

Over eight years Bush added $5 trillion to our national debt.
The Iraq occupation is "off budget", so add another trillion.
Throw in $400 billion for the Pfizer welfare program (Medicare D).
And Paulson flushed a few trillion down the Wall Street toilet last September.

For eight years nobody said a word about our skyrocketing debt.
Obama is in for 4 months and suddenly there is concern over our national debt?

Where were the budget conservatives from 2001-2009?

[Stellabella]

12. Exactly.

These hypocrites drive me nuts.

[Igel]

15. "Budget conservatives" were around.

Many of them were dems, now silenced by either their peers or by a kind of existential embarrassment.

Many repubs, now loud, were silenced by their peers or by a kind of existential embarrassment at having "their" president in charge of such huge deficits. But many who spoke out against the debt were also repubs, however they didn't get cited here because that wouldn't have satisfied the stereotype.

A lot from each party said a *lot* about the skyrocketing debt, back when "skyrocketing" was a paltry $500 billion/year. Those silenced have flipped; now dems are silent, not repubs. Such is the power of not being in power.

The Iraq spending was off budget but is included in the national debt. The national debt is a running total, the budget calculations are for year-to-year spending goals and Congressional rule requirements.

[Psephos]

17. Your answer to that graph is to say who cares because the chimp overspent?

Take a look at the graph I posted above and tell me that everything's going to be just fine. I'm waiting.

You're in worse denial worse than the damn-fool drunken-sailor pugs...and that's pretty hard to do. Yet this year's deficit will be larger than all the deficits run up by bush, together. Got that? And then it happens again next year. And again. And again.

http://caps.fool.com/Blogs/ViewPost.aspx?bpid=159954&t=01006124249416869148

[Telly Savalas]

18. So when the effects of the decline in private sector spending are augmented

by cuts in government spending, the recession can snowball into a depression featuring 20%+ unemployment.

Sounds good to me.

[Psephos]

19. You don't even realize how much of the stimulus bill has been spent on stimulating, do you?

Less than eight percent of the stimulus bill has been "obligated" so far (which means it hasn't even been spent), and less than fifteen percent of the stimulus bill will have been obligated or spent by the end of the year. How much has actually been spent to date? Thirty billion dollars.

Which means the emergency, hurry-up, pour-cash-on-the-fire stimulus is a joke.

I notice that AIG and the banks got their $$$ from TARP right away. Hmmm.

Here is the original paper by the President's economic architects that claims without the stimulus bill, unemployment would rise to 8.9% by April. With the bill, the analysis shows unemployment would peak at just below 8%, and thereafter smoothly decline. This is the analysis that was used to sell the package.

http://otrans.3cdn.net/45593e8ecbd339d074_l3m6bt1te.pdf

Now, fast-forward. April's unemployment came in at 8.9%. So what the hell was the bill for? Furthermore, do you think unemployment is going to be going up or down in coming months? As you probably already know, it is going up.

Well, no surprise there. There's vanishingly little that fits the definition of Keynesian stimulation in this bill. (That's Krugman's view, by the way.) Take a read of the bill below, and maybe you can come back with some compelling evidence to the contrary. Generalities won't cut it, and please don't copy and paste a rant from someone's blog, either. If you don't know what Keynesian stimulation involves, look it up on a reputable economics site.

Until then, I'm comfortable with my view.

http://www.readthestimulus.org/

The US's marketable debt has now risen to an unprecedented $6.36 trillion. On May 11, the CBO raised its estimate for the deficit this year to a record $1.84 trillion – up 5 per cent just from the February estimate, and equal to about 13 per cent of GDP. You think it will be going up more, or down, in coming months?

Deficits like this are expected in years ahead as far as the eye can see, even though the Administration is saying with a straight face that the recession will end this year and we will have nearly 4% growth next year. The spending, in other words, is not stimulative. It is structural. By definition.

The US will run up more debt in the next five years than under all US Presidents together in the past 233 years. And then add the same astonishing amount again in another five years past that. That's according to the Administration's own figures.

Look at this graph again.

http://www.washingtonpost.com/wp-dyn/content/graphic/2009/03/21/GR2009032100104.html

Then look at what is happening in California. Like what you see? The only difference is that California cannot print money. But even printing trillions of dollars (as the Treasury is doing right now) only delays the day of reckoning. It cannot prevent it.

[Wednesdays]

6. K&R

:kick:

[high density]

8. BS speculation

Who knows where we will be in 3-4 years. Obama has already said he is concerned about the deficit, but we cannot be too fixed on that until the economy recovers. Damned if you do, damned if you don't. The government will continue spending tons of money because private businesses are so fearful right now.

[ixion]

9. not speculation, simple economics

when you create more debt than you have assets, you are in a state of insolvency. We're walking the path the so many nations have walked before us. The path is well-known, and folks continue to deny that we're even on that path.

When the wheels come off, there are going to be many folks in for quite a shock, IMO.

[high density]

13. So what do we do?

Stop spending and let the country wither? This is an odd time to suddenly be so concerned with the deficit. The deficit was not even on the radar when we were binging on war a few years ago. What was Bill Gross saying then?

I'm surprised now that DUers apparently want us to balance the budget while the economy falters, like Hoover did.

[ixion]

14. I realize the paradox... no good choices at this point, other than

to get it over with.

BushCo pushed it right up to the high water mark, and then turned it over to Obama. Now he's spending more to try and stimulate the economy, but the problem is Bush used up all the buffer zone, so now we're in meltdown mode.

I'm not sure exactly what Bill Gross was saying a few years back, but I know there were plenty of economists sounding the alarm as early as 2002. Mogambo Guru and Nouriel Roubini not the least among them.

At that point, though, hardly anyone was listening. Everyone was too busy refinancing their home, or selling, or flipping or whatever.

During the period that the real estate market heated up, I would periodically look at a few houses to get a feel for the market. What I found was that by 2004, the market was so over-valued that it made no sense at all to buy anything. An average 150k house was going for 300k and up. It was nuts. I remember telling one of the agents who took me around that this bubble would not end well.

Whenever a core component, like housing, becomes a speculated commodity, you can be sure that the wheels are close to coming off. The tech bubble was isolated, and the shudder felt collectively when that bubble burst should have been all we needed to warn us off inflating another one.

But the time for talking about it is over now. The damage is done. All the bailouts in the world are not going to solve the problem. The economy needs to right itself on a real value, not a bunch worthless "investment vehicles" and fuzzy math. The problem is, we're still using both. Banks have yet to write down the value of their assets, which means there's still a swamp of bad debt in the form of CDSs and CDOs and like garbage. Now, on top of that, we've breached our debt load.

So what happens next.

Well, first, we fail. Then we start to rebuild.

We're not the first country that's gone through this, and we won't be the last, but it's our turn now, and it's our own fault.

[closeupready]

11. Oh no, you're wrong. This is going to happen.

Surprised it hasn't already happened.

[Igel]

16. A lot of "investment" is about

being transformational, about getting the economy running *right*. That's different from just getting the economy running.

Those who squealed about the level of additional debt in 2004 and 2005 are perfectly content with *greater* levels of additional debt projected for 2011 and 2012. Much of the squealing then, as now, is partisanship; much of the lack of squealing, now and then, is partisanship.

[Dark]

20. Bwahahahahaha. Yea. Just go ahead and destroy the U.S. economy.

And watch the World's fall apart.

This isn't going to happen. If it were to, every nation on the planet would have an economic disaster.

[No Elephants]

21. "Would have?" Don't you mean "has been having?"

[Psephos]

23. Yes, exactly

Reminds me of the saying, "There are none so blind as those who will not see."

[tj2001]

22. All these ratings are so bogus

Sovereign ratings are as bad as investment bank ratings