Tuesday, August 9, 2011

Credit Rating

So what does it mean now that one of the 3 credit rating agencies has downgraded the US government from its coveted AAA rating? Apparently very little.

People are still running into US securities as he stock market continues in a downward spiral. Ironically, some blame Mondays dip on the lower credit rating. But if people were concerned about the government's ability to pay its debt, there would be movement either into stocks or corporate bonds and out of treasury bills.

The US government is not the first government to lose AAA rating. Japan got downgraded to AA- by S&P and they are currently the nation with the highest debt to GDP ratio of over 200% and yet they have managed to keep interest rate at a savings killing 1.5%.

Since it is not politically feasible to reduce spending as both Democrats and Republicans are unwilling to cut either entitlement or military spending, the debt of the US government will only go up and the percentage of the annual budget devoted to interest on the debt will only increase. These means that future generations will have to give up more of their blood and sweat through higher taxes to pay for our excesses.

To my daughters generation, I am sorry. I opposed the governments massive deficits and kept screaming at my representatives Washington but they only ignore my pleas.

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