On Thursday, Standard & Poor’s said Britain may have its rating cut because of rising debt levels. Though the ratings agency reaffirmed the country’s actual long-term credit rating at “AAA,” it said the outlook had deteriorated because of massive borrowing to deal with the recession and the banking crisis.
Because Britain is pursuing similar policies to the U.S.””with both the Bank of England and the Federal Reserve injecting billions of dollars in their economies by buying assets from banks””the move also weighed on U.S. assets and the dollar. Treasurys sold off Thursday, and continued to do so Friday.
S&P’s announcement “wound up creating more problems for the U.S. dollar than for the British pound,” HSBC analysts said in a research note.
“The problem for the U.S. is particularly acute because of its reserve status,” said UBS analyst Brian Kim in an e-mail to investors Friday. Major holders of U.S. debt, such as Middle Eastern sovereign funds and the Chinese government, have not been shy about calling the U.S. out for what it sees as policies that will trigger inflation, shrinking the value of their Treasury holdings.
I am shocked beyond words to discover that massive debt coupled with the unfettered printing of colored pieces of paper that the government is attempting pass off as money would reduce confidence in our currency.
Indeed, AO, it would seem that the smart thing for people to do is run up huge balances on their credit cards then, when those are about to implode, borrow massively on their homes to make the minimum payments on the cards and purchase lots of things like flatscreens, cars and vacations. It’s great because it’s [i]stimulus[/i] and thus you never, ever have to pay it back.
Jeffersonian,
Even better would be to borrow money up to your eyebrows now and wait til inflation cuts the value of the money in half or worse… then pay off your loans effectively at pennies on the dollar.
Tell me, AO…I used to live in Brazil. I saw this up close and personal for 3-1/2 years, and with it inflation that ranged from 230-900% per annum.