Another US Debt Downgrade Is Coming In Just A Few Weeks

[I AM NOT THAT GUY 5,715]

Monster Prediction From Bank of America

In an analyst note, Bofa/ML's Ethan S. Harris drops a bit of a bombshell prediction:

We expect a moderate slowdown in the beginning of next year, as two small policy shocks—another debt downgrade and fiscal tightening—hit the economy. The “not-so-super” Deficit Commission is very unlikely to come up with a credible deficit-reduction plan. The committee is more divided than the overall Congress. Since the fall-back plan is sharp cuts in discretionary spending, the whole point of the Committee is to put taxes and entitlements on the table. However, all the Republican members have signed the Norquist “no taxes” pledge and with taxes off the table it is hard to imagine the liberal Democrats on the Committee agreeing to significant entitlement cuts. The credit rating agencies have strongly suggested that further rating cuts are likely if Congress does not come up with a credible long-run plan. Hence, we expect at least one credit downgrade in late November or early December when the super Committee crashes.

This is quite a stunning prediction, mainly because nobody is talking about this. And though the experts were 100% wrong in thinking that a downgrade would increase borrowing costs, it did cause a major market jolt when it happened, leading to a major blow to confidence in August and September.

Another round of that would certainly not be helpful.

Hense Harris' note is titled "Enjoy It While It Lasts." We have a nice little upswing in economic data, but next year could be rough again, when these confidence shocks hit.

As for the immediate term, Harris sees 2.7% GDP for Q3 (the advance estimate for which will be released this coming Thursday) and 2.3% GDP for Q4.

Read more: http://www.businessinsider.com/huge-prediction-from-bofa-another-us-debt-downgrade-is-coming-in-just-a-few-weeks-2011-10#ixzz1biAizjQT

Edited October 24, 2011 by Crusty Old Perv

[mawilson 2,133]

The credit rating agencies have strongly suggested that further rating cuts are likely if Congress does not come up with a credible long-run plan.

In other words, further rating cuts are guaranteed.

[웃 910]

In other words, further rating cuts are guaranteed.

The European Union may ban credit- ratings companies from making assessments of nations receiving European or international bailouts as part of plans for tougher regulation of the industry.

http://news.businessweek.com/article.asp?documentKey=1376-LTD3OC6JTSEJ01-50CD8MF6HF3T388AA12B0OFENV

[I AM NOT THAT GUY 5,715]

The European Union may ban credit- ratings companies from making assessments of nations receiving European or international bailouts as part of plans for tougher regulation of the industry.

http://news.businessweek.com/article.asp?documentKey=1376-LTD3OC6JTSEJ01-50CD8MF6HF3T388AA12B0OFENV

On the other hand, US Law requires all government securities to be independently rated to protect investors.

[luckytxn 2,264]

Thanks Obama the Socialist for another down grade.

[mawilson 2,133]

The European Union may ban credit- ratings companies from making assessments of nations receiving European or international bailouts as part of plans for tougher regulation of the industry.

Ban ratings

Because that's gonna help

[Usui Takumi 1,562]

Thanks Obama the Socialist Oligarchs for another down grade.

[Dan J 277]

Thanks Obama the Socialist for another down grade.

Wasn't the main reason for the downgrade all the near government shutdowns caused by Republicans holding the government hostage? The ratings agencies take into account the political will as well as fiscal health. Recently the political will of the Republican has been to block the President no matter the cost to the country.

[I AM NOT THAT GUY 5,715]

Wasn't the main reason for the downgrade all the near government shutdowns caused by Republicans holding the government hostage? The ratings agencies take into account the political will as well as fiscal health. Recently the political will of the Republican has been to block the President no matter the cost to the country.

[MyLittlePony 340]

Who needs credit just get you in more debt.

[Gary and Alla 3,694]

It isn't enough for Obama to be the first President to get it downgraded, he wants to hold the record for a LONGGGGGGGGGGG time and he knows he only has until next year to do it.