"The following are 8 more reasons why you should be deeply concerned that the U.S. government has lost its AAA credit rating....
#1 The U.S. dollar and U.S. government debt are at the very heart of the global financial system. This credit rating downgrade just doesn't affect the United States - it literally shakes the financial foundations of the entire world.
#2 As the stock market crashes, investors are flocking to U.S. Treasuries right now. However, once the current panic is over the U.S. could be faced with increased borrowing costs. The credit rating downgrade is a signal to investors that they should be receiving a higher rate of return for investing in U.S. government debt. If interest rates on U.S. government debt do end up going up, that is going to make it more expensive for the U.S. government to borrow money. The higher interest on the national debt goes, the more difficult it is going to become to balance the budget.
#3 We could literally see hundreds of other credit rating downgrades now that long-term U.S. government debt has been downgraded. For example, S&P has already slashed the credit ratings of Fannie Mae and Freddie Mac from AAA to AA+. S&P has also already begun to downgrade the credit ratings of states and municipalities. Nobody is quite sure when we are going to see the dominoes stop falling, and this is not going to be a good thing for the U.S. economy.
#4 10-year U.S. Treasuries are the basis for a whole lot of other interest rates throughout our economy. If we see the rate for 10-year U.S. Treasuries go up significantly, it will suddenly become a lot more expensive to get a car loan or a home loan.
#5 The current financial panic caused by this downgrade is hitting financial stocks really hard. The big banks led the decline back in 2008, and it looks like it might be happening again. Just check out what CNN says happened to financial stocks on Monday....
#6 China is freaking out. China's official news agency says that China "has every right now to demand the United States to address its structural debt problems and ensure the safety of China's dollar assets". If China starts dumping U.S. government debt that would make things a lot worse.
#7 There are already calls for the Federal Reserve to step in and do something. If the U.S. economy drops into another recession, will we see more quantitative easing? It seems like we have reached a point where the Fed is constantly in "emergency mode".
#8 The U.S. national debt continues to get worse by the day. Just check out what economics professor Laurence J. Kotlikoff recently told NPR....
#1 The U.S. dollar and U.S. government debt are at the very heart of the global financial system. This credit rating downgrade just doesn't affect the United States - it literally shakes the financial foundations of the entire world.
#2 As the stock market crashes, investors are flocking to U.S. Treasuries right now. However, once the current panic is over the U.S. could be faced with increased borrowing costs. The credit rating downgrade is a signal to investors that they should be receiving a higher rate of return for investing in U.S. government debt. If interest rates on U.S. government debt do end up going up, that is going to make it more expensive for the U.S. government to borrow money. The higher interest on the national debt goes, the more difficult it is going to become to balance the budget.
#3 We could literally see hundreds of other credit rating downgrades now that long-term U.S. government debt has been downgraded. For example, S&P has already slashed the credit ratings of Fannie Mae and Freddie Mac from AAA to AA+. S&P has also already begun to downgrade the credit ratings of states and municipalities. Nobody is quite sure when we are going to see the dominoes stop falling, and this is not going to be a good thing for the U.S. economy.
#4 10-year U.S. Treasuries are the basis for a whole lot of other interest rates throughout our economy. If we see the rate for 10-year U.S. Treasuries go up significantly, it will suddenly become a lot more expensive to get a car loan or a home loan.
#5 The current financial panic caused by this downgrade is hitting financial stocks really hard. The big banks led the decline back in 2008, and it looks like it might be happening again. Just check out what CNN says happened to financial stocks on Monday....
Financial stocks were among the hardest hit, with Bank of America (BAC, Fortune 500) plunging 20%, and Citigroup (C, Fortune 500) and Morgan Stanley (MS, Fortune 500) dropped roughly 15%.
#6 China is freaking out. China's official news agency says that China "has every right now to demand the United States to address its structural debt problems and ensure the safety of China's dollar assets". If China starts dumping U.S. government debt that would make things a lot worse.
#7 There are already calls for the Federal Reserve to step in and do something. If the U.S. economy drops into another recession, will we see more quantitative easing? It seems like we have reached a point where the Fed is constantly in "emergency mode".
#8 The U.S. national debt continues to get worse by the day. Just check out what economics professor Laurence J. Kotlikoff recently told NPR....
"If you add up all the promises that have been made for spending obligations, including defense expenditures, and you subtract all the taxes that we expect to collect, the difference is $211 trillion. That's the fiscal gap"at http://theeconomiccollapseblog.com/archives/a-634-point-stock-market-crash-and-8-more-reasons-why-you-should-be-deeply-concerned-that-the-u-s-government-has-lost-its-aaa-credit-rating
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