Thread: QE3 Sparks U.S. Credit Ratings Downgrade From Egan-Jones

QE3 Sparks U.S. Credit Ratings Downgrade From Egan-Jones

By Matt Egan
Published September 14, 2012
FOXBusiness


Fearing the negative repercussions of the Federal Reserve’s latest easy-money program, ratings firm Egan-Jones once again slashed the U.S.'s credit rating on Friday.

The latest downgrade brings the firm’s rating on the world’s largest economy down to “AA-,” which is three notches below the coveted “AAA” threshold.

Egan-Jones said it believes the Fed’s third round of quantitative easing, which sent stock prices surging on Thursday, “will hurt the U.S. economy and, by extension, credit quality.”

The firm said that while the program should boost equity markets, issuing additional currency and depressing interest rates through purchasing mortgage-backed securities will hurt the value of the U.S. dollar and cause a painful increase in commodity prices.

“In our opinion, QE3 will be detrimental to credit quality for the U.S.,” Egan-Jones said.

At the same time, Egan-Jones warned that the cost to finance U.S. debt will “slowly rise” as the global economy rebounds and the Fed scales back on its purchases of Treasury securities.

The ratio of U.S. debt to gross domestic product soared to 104% in recent months from 66% in 2006 and will likely increase to 110% in a year, the firm said. By comparison, Spain’s debt-to-GDP stands at 68.5%.

Fed Chairman Ben Bernanke addressed some of these concerns during his press conference on Thursday, noting that quantitative easing is not “comparable to government spending.”

Bernanke said the Fed will eventually “normalize its balance sheet by selling” recently-acquired financial assets back into the market.
“The odds are strong that the Fed’s asset purchase programs, both through their net interest earnings and by strengthening the overall economy, will help reduce rather than increase the federal deficit and debt,” Bernanke said.

The chairman also acknowledged concerns about inflation, pointing out that overall inflation has averaged very close to the Fed’s 2% annual target for a number of years and the central bank remains “fully committed” to its price stability mandate.

The Egan-Jones downgrade comes just days after Moody’s (MCO: 43.82, +0.07, +0.16%) warned it too would downgrade the U.S. if Congress failed to reach a compromise to avoid the so-called fiscal cliff.
The Congressional Budget Office has warned that a failure to find a deal to avert these looming spending cuts and tax increases would send the U.S. into a recession.

Egan-Jones first removed the U.S.’s pristine “AAA” credit rating in July 2011 and then further downgraded the country to “AA” in April of this year.

Read more: QE3 Sparks U.S. Credit Ratings Downgrade From Egan-Jones | Fox Business

you could see that coming from 1000 miles away... you better start preparing for multiple more down grades

I wouldnt take my word for it... just stick around

you are in year 5 of a 10 - 12 year hyper-Inflationary depression

your neck deep in the Depression

the hyper-Inflationary part is coming up on you fast ...

They are going to keep printing money until this thing reaches its sad and pathetic end. Right now they just dont want the bubble to fully collapse till after the elections.

Price of everything average folks buy is going to go up and up stretching all of use more.

W

Marc Faber: "Fed Will Destroy The World"

"Everything will collapse" is the consequence Gloom, Boom, & Doom's Marc Faber sees from the Fed's latest 'stimulus' (and the fallacy and misconception of how money-printing can help employment). In a wondrously clarifying interview on Bloomberg TV this morning, Faber explained why he was 'happy', since "the asset values of his holdings will go up" but as a responsible citizen he is worried because "the monetary policies of the US will destroy the world." It truly is class warfare under a veil of 'its good for you' as he notes: "the fallacy of monetary policy in the U.S. is to believe this money will go to the man on the street. It won't. It goes to the Mayfair economy of the well-to-do people and boosts asset prices of Warhols." Congratulations, Mr. Bernanke.

Must-watch (or read the transcript) - it is truly remarkable.

Video at the page Link:

Marc Faber: "Fed Will Destroy The World" | ZeroHedge

Fed Announces QE-Infinity

September 14, 2012 by Sam Rolley

The Federal Reserve announced Thursday that the United States will definitely go into another round of quantitative easing, despite the economic failure of QE1 and QE2.

The central bank announced in a statement:

To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee agreed today to increase policy accommodation by purchasing additional agency mortgage-backed securities at a pace of $40 billion per month.

The Committee also will continue through the end of the year its program to extend the average maturity of its holdings of securities as announced in June, and it is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities.

These actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.

The difference between this round of quantitative easing and previous inflationary stimulus attempts made by the Fed is that this time the central bank announced an open-ended timeframe for bond buying.

Essentially, the Fed has given itself the power to buy bonds for as long as it wants without announcing any more quantitative easing.

Gold stocks, as expected, skyrocketed after the announcement.

Fed Announces QE-Infinity : Personal Liberty Digest™

QE-Infinity, that is a good way to put it.

W

Anyone here watch the dollar index? I started watching it daily a few months ago and the last few days it's been dropping like a lead balloon!

I've heard that when and if it drops below 70 then get OUT of paper money and get your money out of the bank. That would be the point when other countries start selling off our T-bills and the dollar will crash.

On Friday the dollar ended at 78.84 with a previous close at 79.27. When looking at a 5 year graph, the last time the dollar was at or near 70 was in 2008 when the SHTF!

Egan Jones Downgrades US From AA To AA-


Submitted by Tyler Durden on 09/14/2012 15:22 -0400

• Budget Deficit
• default
• Default Probability
• Egan-Jones
• Egan-Jones
• Global Economy
• Gross Domestic Product
• Money Supply
• Purchasing Power
• ratings

From Egan Jones, who downgraded the US for the first time ever last July, two weeks ahead of S&P:

Synopsis: UNITED STATES (GOVT OF) EJR Sen Rating(Curr/Prj) AA-/ N/A Rating Analysis - 9/14/12 EJR CP Rating: A1+ Debt: $15.2B EJR's 1 yr. Default Probability: 1.2%

Up, up, and away - the FED's QE3 will stoke the stock market and commodity prices, but in our opinion will hurt the US economy and, by extension, credit quality. Issuing additional currency and depressing interest rates via the purchasing of MBS does little to raise the real GDP of the US, but does reduce the value of the dollar (because of the increase in money supply), and in turn increase the cost of commodities (see the recent rise in the prices of energy, gold, and other commodities). The increased cost of commodities will pressure profitability of businesses, and increase the costs of consumers thereby reducing consumer purchasing power. Hence, in our opinion QE3 will be detrimental to credit quality for the US.

Some market observers contend that a country issuing debt in its own currency can never default since it can simply print additional currency. However, per Reinhart & Rogoff's " This Time Is Different: Eight Centuries of Financial Folly " , p.111, 70 out of 320 defaults since 1800 have been on domestic (i.e., local currency) public debt. Note, US funding costs are likely to slowly rise as the global economy recovers or the FED scales back its Treas. purchases (75% recently).

From 2006 to present, the US's debt to GDP rose from 66% to 104% and will probably rise to 110% a year from today under current circumstances; the annual budget deficit is 8%. In comparison, Spain has a debt to GDP of 68.5% and an annual budget deficit of 8.5%. We are therefore downgrading the US country rating from "AA" to "AA-".

Ratings History:
Egan-Jones rating history for United States (Govt of).
9.14.12 AA to AA (-)
4.15.12 AA+ to AA (Negative outlook)
7.16.11 AAA to AA+

Full report


Egan Jones Downgrades US From AA To AA- | ZeroHedge

Originally Posted by AirborneSapper7

you could see that coming from 1000 miles away... you better start preparing for multiple more down grades

I wouldnt take my word for it... just stick around

you are in year 5 of a 10 - 12 year hyper-Inflationary depression

your neck deep in the Depression

the hyper-Inflationary part is coming up on you fast ...

Ratings History:
Egan-Jones rating history for United States (Govt of).
9.14.12 AA to AA (-)
4.15.12 AA+ to AA (Negative outlook)
7.16.11 AAA to AA+

Full report


Nuff Said from the Broke A@@ Soldier to the Nation of Fools