Monday, June 27, 2011

All Americans will pay for a loss of our AAA! S&P analysis determines what The Political Commentator knew a longtime ago!

The U.S. will pay for a loss of our AAA!

If U.S. government borrowing costs increase significantly in the near term the cause will undoubtably be some combination of
  • inaction on the debt ceiling, or
  • the "kicking the can down the road" for a resolution of our long-term fiscal condition.
These two events could possibly result in a downgrade of U.S. debt from the previously thought to be untouchable AAA rating. As a result of a downgrade and higher yields demanded by investors,
  1. Current holders of treasury's will face immediate and substantial paper losses (if held to maturity no losses would be realized), and
  2. We the people will face the prospect of paying more in order to entice anyone to buy our bonds.
A classic lose-lose situation.

From S&P last week:

"... The S&P analysis calculates a reduction in the rating to double A or single A would spark a decline of 2 per cent and 3.2 per cent respectively in the price of the 10-year Treasury note, sending yields higher.

The price of the 30-year bond would drop by 3.9 per cent and 6.3 per cent under these scenarios. The analysis focuses on Treasury debt with a maturity longer than two years as this sector is least affected by the Federal Reserve’s near zero interest rate policy. As such, the estimate of costs associated with a downgrade is considered conservative..."

From The Political Commentator on April 18th:

"... Increased federal borrowing costs through higher required interest rates due to an imposed risk premium by our lenders will effectively throw the United States into a fiscal death spiral.

We will face larger deficits requiring higher interest rates leading to larger deficits and so on until we will be in the same condition as the EU PIGS Greece, Ireland and Portugal paying 10%+ to borrow money..."

A high-stakes game of chicken looms on the horizon with Americans facing the consequences from the eventual outcome!

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1 comment :

  1. Obama's Sotomayor - Supremely Ignorant and a Supreme Criminal

    Online book details the ignorance and outright criminal behavior of Barak Obama's First appointment to the Supreme Court. An appointee that will impact Americans for decades.

    Details at:

    Especially chapters 9, 11 and 12 although the entire book details evidence presented to Sotomayor of massive corruption and crime in Howard Dean's Vermont that she chose to endorse. Her behavior is criminal and violates the ethical rules governing the conduct of both judges and attorneys.

    Sotomayor should be impeached.