Bad news: German Rating Agency Feri Downgrades US Government Bonds: AAA to AA

[Whoa_Nelly]

The first Western downgrade of US government bonds is a fact! The German credit rating agency Feri lowered its rating on US debt by a full notch, from AAA to AA.

Here's the english translation:

Homburg, 8 June 2011 - The Bad Homburg Feri EuroRating & Research AG downgraded the first credit rating agency's credit rating for the United States from AAA to AA. Feri analysts justify the downgrade by the continuing deterioration of the creditworthiness of the country due to high public debt, inadequate fiscal measures, and weaker growth prospects.

"The U.S. government has fought the effects of the financial market crisis primarily by an increase in government debt. We do not see that there is sufficient attention being paid to other measures, "said Dr. Tobias Schmidt, CEO of Feri Rating & Research AG. "Our rating system shows a deterioration in economic health, so the downgrading of the credit ratings of U.S. is warranted."

For the third consecutive year the deficit of the United States is in double digit percentages relative to gross domestic product (GDP). "Deficits of such magnitude are not a sustainable fiscal policy. We would reconsider the rating when the U.S. government creates a long-term sustainable budget," said Schmidt.

Feri Rating is listed on the Federal Financial Supervisory Authority (BaFin) as an EU credit rating agency approved and created with more than 20 years experience in sovereign ratings. Every month, the Feri analysts evaluate sovereign credit ratings from the perspective of a foreign investor based on the ability and willingness of countries to repay their debts. The credit ratings have eleven possible gradations between "AAA" (best credit) and "Default".

http://www.zerohedge.com/article/german-rating-agency-feri-downgrades-us-government-bonds-aaa-aa

[aquart]

1. Will this in any small tiny way hurt any of our billionaires?

Even a little?

[ixion]

2. And so it begins...

hang on folks... it's going to be a bumpy ride.

[dixiegrrrrl]

3. I honestly do not think a lot of people get the connection even yet.

Plus, there is this:

France's biggest bank is limiting how much cash you can take out.

La Banque Postale has lowered the limits on the amounts of cash customers can withdraw per week by 50%. First of all, for you Americans and Brits, the way France works its banking system – customers are limited to how much they can withdraw per week from their accts no matter what the balance. Now what has happened here is that Gold card members – who could take out 3,000 euros a week – are now limited to 1,500 a week. This was sudden, without warning, and people here in France are freaking out. Pierre tells me that its the first clear sign that liquidity in the European banking system is drying up.

http://maxkeiser.com/2011/06/07/the-biggest-bank-in-france-has-atm-card-access-to-cash-in-half/

[ixion]

4. I agree

I think a vast majority of the people don't really 'get' macro-economics in general. They've got a few catch phrases, like "gold standard", etc, but as far as a deeper understanding of how a fiat currency works, and what it means for that currency when the bond rating starts dropping, yeah I don't think most people have gotten their heads around that yet.


The other argument I hear from people is the "too-big-to-fail" argument, which goes, simply: The US economy is so all-encompassing that it will never undergo the same type of market corrections experienced by Argentina, Russia, Japan, etc, and since the dollar is the world's default currency, it doesn't matter anyway, because of that position. This is all nonsense, of course. There is no such thing as "too-big-to-fail". Period. Any system, no matter the scale, is susceptible to failure.

It's going to be a nasty shock to these folks when it does happen.