Rick Santelli: If Not For Tea Party, U.S. Would Be Rated BBB
After Standard & Poors downgraded the United States credit rating from AAA to AA+ figuring pointing was the spin of the day on Sunday and then again on Monday as the NYSE plunged over 600 points. Many Democrats, including Vice President Biden, asserted that the Tea Party held the country "hostage" and acted like "terrorists" when drawing the line in the sand and saying they would not increase the debt ceiling unless real deficit reduction was done. At the eleventh hour Congress cobbled together a debt ceiling increase with cuts to base line increases in budgets going forward while establishing a Super Congress to come up with more cuts to the budget.
Before the Tea Party faction of Congress held the debt ceiling debate "hostage" all three rating agency warned that government had spent to much. Notice one thing missing in the warnings by S&P, Moody's and Fitch - not one said that raising revenue was the issue for downgrades and lowering the outlook for the United States. All three rating agencies are unified that they are worried that spending will continue to outpace revenues resulting in more debt accumulation. The trouble is that 60% of our budget comes in the form of entitlement programs, 20% of the budget is military spending, and the final 20% is everything else. Many have pointed to two wars as the crux to our budget woes.
While that is part of it, the bigger aspect of our budget that we need to address is the growing costs of entitlement programs. Now, we cannot change the game for those near the retirement goal. So what do we do? What proposals are out there to cut the base line spending increases from the budget because even though we reduced the budget for next year we didn't actually cut it. All one has to do is go back and read the bill that was passed. It spells out how we may cut future spending increases which have been touted as spending cuts. Do our elected officials think we are that stupid?
Essentially what they are telling us is: Joe the Car Buyer is looking to purchase a new SUV. Joe the Car Buyer has budgeted $50,000 to purchase that new car. Joe the Car Buyer is on XYZ Car Lot and sees that sticker price for that new SUV is $70,000. After talking with the Sales guy and the Sales manager the final offer from XYZ Cars is $60,000. To get Joe the Car Buyer over the finish line the Sales Manager said that Joe the Car Buyer was actually saving $10,000 even though he had only a budget of $50,000. This is essentially how Congress and the Obama Administration is treating us.
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LOL.....you are posting an article written by a gold bug about how US treasury bonds deserve a BBB rating and we're supposed to take it seriously?
ReplyDeleteReally? This guy has a clear agenda to drive up gold prices and always has.....he's a former gold trader who talks about the value of investing in gold constantly. Golds biggest competitor for "safe haven" investing is the T-Bill. If he can devalue the T-bill he increases gold's value.
Yeah, I'll put as much stock in his opinions as I do those of S&P who are mathematical hacks that make 2 TRILLION DOLLAR ERRORS in their analysis and then claim it's "not material" to the outcome. There's no way 2 TRILLION isn't material, it's 10% of the 10year debt estimate. They just didn't want to rescind their political statement that US debt was downgraded because they'd look stupid.
And these are the same guys that rated mortgage securitization bonds and credit default swaps as AAA 5 years ago - so really, how much credit should we give any of their opinions.
But Rick Santelli? I can't take you seriously when that's the source of your posts.
Truman - Regardless of his views on Gold, all three rating agency have downgraded the outlook but it's only S&P that actually downgraded the rating of the United States. I agree that $2T is a lot of money but even with the error it still leaves our near term spending issues in question to hamper our ability to pay back our debt.
ReplyDeleteRemember that all three rating agencies had similar views on mortgages because the lender of last resort - Freddie and Fannie - existed. Santelli may be pimping gold but he is echoing the concerns of all three rating agencies. I find it interesting that had the United States cut $4T the rating would not have changed.
Did you not like my example of base line logic with Joe the Car Buyer?