29 July 2011 »
Last week we came across an “Economic and Policy Watch” update prepared by a major investment bank that reviewed recent government proposals to address the nation’s funding crisis. Titled “It Just Gets Worse,” the report chided policymakers for actions that “look like a poor cover for loose money, rising inflation, and fiscal problems,” and warned that “government financing needs are corrupting monetary policy.” As a result of these ill-advised tactics, the bank had turned “more negative” on the outlook for financial stability and saw “little hope of improvement in the inflation/currency mix.”
Amidst the barrage of news coverage from dozens of sources probing the US debt/default/downgrade issue, such a conclusion might seem unremarkable. We found it of interest because the focus of the report was not the US Treasury but the government of Indonesia, and it appeared over a decade ago, on July 16, 2001.
Sovereign Debt Ratings – The Rest of the Story…
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29 July 2011 »
We’ve been bombarded lately with dire predictions about this country’s budget crisis, and the frightening ramifications if the US were to default on any of its debt. But let me ask you: Do you personally believe that the US government will default on its debt payments? Or do you believe – as most do – that politicians on both sides of the aisle have been using the debt issue as a political bargaining chip, and that some sort of 11th hour agreement will be struck to allow the US to pay its creditors? Do you think any of these politicians want to go down in history as being part of the group that refused to come to an agreement, and forced the US into default?
Regardless of which date politicians and economists might have us believe is the “drop dead” date, has anything substantive changed in the US economy over the past few months? Everyone knew about this pending deadline more than two months ago on May 16th when the story first broke about the US reaching its debt limit. The economy has undergone no significant changes/shocks in the interim. Stocks have remained relatively stable up until this week where we’ve seen some heavier selling.
Interestingly, The US Treasury…
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Last week we came across an “Economic and Policy Watch” update prepared by a major investment bank that reviewed recent government proposals to address the nation’s funding crisis. Titled “It Just Gets Worse,” the report chided policymakers for actions that “look like a poor cover for loose money, rising inflation, and fiscal problems,” and warned that “government financing needs are corrupting monetary policy.” As a result of these ill-advised tactics, the bank had turned “more negative” on the outlook for financial stability and saw “little hope of improvement in the inflation/currency mix.”
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