Comment

Comment by John Ray on August 5, 2011 at 8:31pm

No surprise.  With debt the size of the Gross Domestic Product and rising with no end in sight, even if there is no chance of a default in dollar terms, debt service as a practical matter has two huge challenges.  First, our debt service becomes extremely sensitive to variations in interest rate.  3% interest rate means minimal debt service is 3% of GDP.  Double that to 6%?  Service is 6% of GDP.  Under Carter rates went to 20%.  How much do we collect in taxes?  Interest on the debt alone soon swallows the entire national budget like a tiny black hole swallows a star.  Second is inflation.  Although there is no doubt that default will not occur, still what amount of goods and services will the money buy when paid back versus when it was loaned?  $10,000 will buy about 7,700 Swiss Francs or 6.1 ounces of gold or 2,800 gallons of gasoline, "X" acres of productive farmland, or whatever commodity, good, service, or financial instrument you wish to price today.  How much will it buy when the bond is paid back ten years from now?  If you received 9 annual payments of $300 plus the $10,000 at the end, would you come out ahead?  The supposedly safe haven of the US Bond begins to look very risky.  It is still called free market competition, and try as they may, the US Government still can't quite shut it down.  S&P owes their investors good advice or S&P loses their credibility, which is all a rating service has to trade on.  Speak truth or die.

Comment by JL Gawlik on August 5, 2011 at 8:30pm

LoOK at iT this way: President Obama has set another new precedent, FIRST PRESIDENT EVER to have the USA credit rating downgraded from triple A. I really think he has Carter beat... by a mile... by trillions of miles!

 

Billie just last year when the Progressive Democrat Congress gave him a clean debt ceiling of a record breaking $1,900,000,000,000.00 TRILLION dollars back in Jan 2010, in less than 30 days they spent over $500,000,000,000.00 plus billion dollars and almost a little more than a year later it was ALL gone.

 

S&P warned that the Cut, Cap and Balance plan would avoid a downgrading. That bill passed the House over two weeks ago, with bipartisan votes, and with more than enough time to have been signed into law before August 2 nd deadline. Senate Majority Leader Harry Reid pulled a procedural move and shelved it. DID NOT even allow a open debate on the floor. He is running the Senate the same as he and Pelosi have since Jan 2007 not allowing open debates on the floor, doing closed door, back room deals. They are what is wrong in Congress and DC. A closed government.

 

Sabrina, It finally was mention on Hannity, just a few minutes ago. TWiTTeR was filled with so much back an forth that they (S&P after Obama administration challenged the figures and accounting), found a 2 Trillion dollar error that S&P made and they were trying to verify the sources and get the official word apparently the administration has been trying to quietly deal with it. It is now official.

Comment by sabrina Wheeler on August 5, 2011 at 8:29pm

Nothing changes if nothing changes. It takes a whole lotta pain to change someone's behavior.

Comment by Joanna B McDermott on August 5, 2011 at 8:28pm

The is unbelievable....how stupid are they in DC and shame on the Republicans who caved in.

Comment by Ron Ogletree on August 5, 2011 at 8:27pm

Yea, like nobody saw this one coming!  All the ratings houses were warning that if we did not reduce the spending by at least 4 trillion, this would be the result.  The sorry thing is this was listed as a news flash.  To who?  Realisticly , the wizards of smart in the LSM, Mordor on the Potomac and only to a few Amazon tribesmen!

Comment by FCTP on August 5, 2011 at 8:09pm

The return of normalcy.

Since the sky is now apparently the limit, I rechristen the debt ceiling “the debt sky.” But seriously — no, that was serious.

The Washington Times reported Wednesday:

U.S. debt shot up $239 billion on Tuesday — the largest one-day bump in history — as the government flexed the new borrowing room it earned in this week’s debt-limit increase deal.

The debt subject to the statutory limit shot way past the old cap of $14.294 trillion to hit $14.532 trillion on Tuesday, according to the latest the Treasury Department figures, which are released on the next business day.

That increase puts the government already remarkably close to the new debt limit of $14.694, which means one day’s new borrowing ate up 60 percent of the $400 billion in space Congress granted the president this week.

 

Read more at http://www.thefreemanonline.org/columns/tgif/the-debt-sky/

Comment by Joanna B McDermott on August 5, 2011 at 8:03pm

We are so screwed.

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