SGM Metals: Moody's Warns of Looming US Credit Downgrade as Debt Ceiling Approaches!

The debt ceiling crisis has been pushed to the back burner but it is coming again & bigger than ever. This time around the threat of credit downgrades for lack of action carry very real consequences for servicing our debt & will cause real problems.
Credit downgrades will derail our ability to service our debt as rates will rise
Credit downgrades will derail our ability to service our debt as rates will rise
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Sept. 13, 2012 - PRLog -- Market News International reports: [WASHINGTON – The following is the text of a statement Tuesday by rating agency Moody’s:

Budget negotiations during the 2013 Congressional legislative session will likely determine the direction of the US government’s Aaa rating and negative outlook, says Moody’s Investors Service in the report “Update of the Outlook for the US Government Debt Rating.”

If those negotiations lead to specific policies that produce a stabilization and then downward trend in the ratio of federal debt to GDP over the medium term, the rating will likely be affirmed and the outlook returned to stable, says Moody’s.

If those negotiations fail to produce such policies, however, Moody’s would expect to lower the rating, probably to Aa1.

Moody’s views the maintenance of the Aaa with a negative outlook into 2014 as unlikely. The ONLY scenario that would likely lead to its temporary maintenance would be if the method adopted to achieve debt stabilization involved a large, immediate fiscal shock such as would occur if the so-called “fiscal cliff” actually materialized which could lead to instability. Moody’s would then need evidence that the economy could rebound from the shock before it would consider returning to a stable outlook.

Moody’s notes that it is difficult to predict when during 2013 Congress will conclude negotiations that result in a budget package. The Aaa rating, with its negative outlook, is likely to be maintained until the outcome of those negotiations becomes clear.

The rating outlook also assumes a relatively orderly process for the increase in the statutory debt limit, says Moody’s. The debt limit will likely be reached around the end of this year, and the government’s ability to meet interest and other expenses out of available resources would likely be exhausted within a few months after the limit is reached.

Under these circumstances, the government’s rating would likely be placed under review after the debt limit is reached but several weeks before the exhaustion of the Treasury’s resources. Moody’s took a similar action during the summer of 2011. ]

Isn’t it funny how we all decide to ignore the elephant in the room (the inconceivable debt ceiling disaster) and it magically goes away for the time being, until it it appears bigger than ever and is now a 10,000 pound gorilla sitting on your chest? Funny how the corporate media was publicly roasting politicians and blaming the Tea Party for the lack of resolution while the circus was going on and the ratings were surging for the network as a result, but when the bosses in the control rooms decided selling the Syrian rebels joined by Al Queda jihadists dmqqv from Libya & Afghanistan as ‘freedom fighters who want democracy’ to push the war in Syria all this faded away quickly. We have not heard anything since the anointed panel of 13 failed to make the necessary cuts to balance the budget and supposed mandatory cuts would be forcibly applied to accomplish what these politicos couldn’t pull of together.

Since then we have seen a white wash on the fact that not only are the ‘Syrian rebels who only want democracy’ actually Al Queda jihadist fighters who our own soldiers have been fighting in other regions of the middle east debacle but now that we are overtly being told they are our ‘allies in democracy’ and this is being used to justify arming the very enemy who is responsible for killing our brave young men and women elsewhere?!? This has all served to redirect the dialogue away from what is important related to the looming banking crisis while serving as proof of the medias ability to dictate the news and either over hype irrelevant news items or bury important ones that don’t serve the missions best interest. At some point the media went from being an organism that reveled in exposing corruption and airing the dirty laundry of the political elite and morphed into a complicate accomplice in selling the agenda.

When we lose our trusted news source and are instead intentionally misdirected to focus on insignificant fluff pieces or misleading foreign affairs stories to support the agenda what do we really have to use as a base knowledge to invest upon? We have nothing trustworthy to rely upon and instead are chasing the false story not only with our trust but with our retirement monies as well which never ends well for the little guy, but I’m sure you know that already. We must ourselves focus on these issues because we will undoubtedly face the debt ceiling again by the end of this year but it won’t be put back into the headline rotation until it’s the last minute for a solution and then the hysteria will begin. It is up to you not to be sucked in at the last minute by being a good little news sheep and only focusing upon what they tell you to focus on and when they tell you to do so. The first important change for solid investing strategies is to be aware of the coming news stories ahead of time so that you are forced to wait until the hype phase delivers the news last minute, that is why this blog is written daily so that it can keep you ahead of the news curve. Secondly, know that the media is sponsored by auto manufacturers, big pharma, banks and Wall Street trading firms thus making their message more compliant to their needs and wants and less about disseminating the truth in order to honestly advise the public in my opinion. This puts you in a precarious position as your news source owes its loyalties to the guys who sign the advertising checks and last time I checked, I didn’t advertise on a major news network nor did I own one so I don’t think they are interested in making sure I’m content.

Trust me when I tell you this next wave of the banking crisis is going to separate itself from the bursting credit bubble of 2008 and clearly establish itself as a true economic crisis as there is far more at risk this time around. For example, Spanish banks in the month of July alone saw over $96 BILLION in cash deposits withdrawn by depositors in daily bank runs as they fear the banking crisis next convulsion is just around the corner. This isn’t exclusive to Spain, the European banks are all reeling from daily bank runs as depositors are preparing themselves financially for what the future may bring. But why aren’t US depositors bracing for impact? Because we are all being sung a recovery lullaby every night, no matter what news outlet or channel you subscribe to for your news, that has us all going back to sleep. Why are central banks reversing a 4 decade long trend of being net sellers of gold bullion and frantically gobbling up metric tons of the inflation hedge if there wasn’t a looming bank crisis on the horizon? Word on the street is that China has been the most aggressive in accumulating gold reserves to hedge their nations wealth and have roughly doubled their nations holdings behind the scenes and intends to make an earth shattering announcement by the end of this year regarding this campaign. I wouldn’t want to be holding all of my life’s accomplishments in paper assets nor paper dollars when this mega announcement is made as it will more than likely be a death blow to the dollar in the final stage of the global currency war between China & the FED. Understanding that the act of printing money can cause inflation, it also must be understood that in an economic slump as we are currently in that inflation can expand a recession into a depression very quickly with little options to stop the trend. It is a far better strategy to PREPARE your portfolio than to attempt to REPAIR your portfolio once the damage has begun. Gold & silver are very solid options to consider in the face of this next cycle of turmoil. Tick, tock.
Source:SGM Metals & The Elemental Economist
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