Tag Archives: AAA credit rating

Labor’s Inbred, Debt-Fed Chickens Coming Home To Roost

3 Apr

As long predicted by your humble blogger, Labor’s economic chickens are coming home to roost.

It looks like the first chicken entering the coop as our long economic night begins to fall, is the sovereign AAA credit rating.

All the other inbred, debt-fed chickens mentioned here over the past two years, will be following close behind.

Houses and Holes at MacroBusiness has the story (my emphasis added, in quoted story):

From S&P and Fitch via the AFR this morning comes the hard, cold truth about the trap in which the Australian economy is caught:

Federal Treasurer Wayne Swan has been put on notice by ratings agencies to deliver a tough budget next month to protect Australia’s coveted AAA credit standing.

Australia is one of only 14 countries in the world with a top ranking from each of the three major agencies but analysts at Standard & Poor’s and Fitch Ratings are concerned about the banking system’s reliance on overseas funding.

The AAA rating is pinned on the strength of the government’s fiscal position and if it doesn’t have that, we have less cause to see it as a AAA-rated sovereign, given how weak the banking system is in terms of its external liquidity,” said S&P credit analyst Kyran Curry.

“To be consistent with maintaining a AAA rating . . the government would really need to stabilise its fiscal position as soon as possible.”

Mr Curry said the external liquidity of Australia’s banking system was“quite weak” and the industry was overleveraged.

Exactly what your humble blogger has been arguing, ever since launching this blog over 2 years ago. Our real economic weakness, is the fundamentally immoral, fraudulent, parasitical, house-of-cards banking system, whose continued existence and blood-sucking profits has been guaranteed by the government (meaning, by you, the taxpayer). Just like it has in the rest of the now-slowly-collapsing Western world.

“If there is stress in the banking system like in Europe, [its] liabilities could migrate on to the government’s balance sheet,” he said.

Fitch Hong Kong-based director Art Woo said banking sector liabilities were always a “potential concern”.

…“The reality is that, if they don’t bring the budget back into surplus, we have to judge why,” Mr Woo said. “Is it because they haven’t put the right measures in place or because you get a cyclical downturn and the revenues don’t come through?”

…“This budget is very important to us,” Mr Curry said. “We will be looking more broadly for the government to demonstrate that it can remain committed to stabilising its debt dynamics over the medium term. This government needs to have a strong balance sheet to offset some of the weaknesses that we see for the sovereign,” he said.

“The main issue is the importance of maintaining a strong balance sheet and running surpluses over the cycle to give the government the sort of flexibility it had pre-2009 to respond should the external environment weaken and present a problem for the banking system, which is highly leveraged.”

…“It’s important that the government stabilises its fiscal position as soon as conditions allow,” Mr Curry said. “We are not necessarily looking for a return of the balance to surplus this year but we would be looking for a continued path to stabilise its fiscal position.”

Through galactic incompetence, pathological self-interest, rampant self-deception, and mindless obeisance to the “bozos” (h/t Alan Kohler) in the Treasury department, the Labor government has now firmly wedged itself.

And the nation.

If Labor does actually (ie, not just on paper, in the budget ‘forecast’) cut government spending by the enormous amount necessary to achieve a budget outcome (not ‘forecast’) that would keep the ratings agencies happy, Australia is absolutely assured of a recession. Why? Because the private sector economy is too weak already to cope with a huge cut in government spending. Meaning … unemployment up => government revenues (income tax) down => government expenses (unemployment benefits) up => government budget deficit worse => credit rating cut more, PLUS mortgage arrears up => defaults up => bank “asset” values down => bank wholesale funding costs up => mortgage interest rates up => more arrears & defaults => bank/s collapse => government bailout/s => sovereign credit rating cut more => economic death spiral, a la Ireland.

If Labor does not actually cut government spending by the enormous amount necessary to achieve a budget outcome (not ‘forecast’) that would keep the ratings agencies happy, Australia is also absolutely assured of a recession. Why? Because as seen above, the ratings agencies will slash the sovereign credit rating. Meaning … bank wholesale funding costs up => mortgage interest rates up => mortgage arrears up => defaults up => bank “asset” values down => bank wholesale funding costs up => mortgage interest rates up => more arrears & defaults => bank/s collapse => government bailout/s => sovereign credit rating cut more => economic death spiral, a la Ireland.

It is all over bar the loud squawking and fighting for an elevated perch and shitting ourselves everywhere, folks.

We are stuffed.

Now, more than ever, it is just a matter of time.

Barnaby was right:

“If you do not manage debt, debt manages you” – Feb 2010

What a terrible shame for each and every one of us, that all the “experts” in politics, Treasury, the RBA, the Canberra Press Gallery, and the leftarded twittering armchair commentariat, poured torrents of rabid scorn and ridicule on the unpolished, plain speaking, “little old bush accountant” from St George way back in late 2009 and early 2010.

If only we had all listened to Barnaby then – when the total Gross Debt was $117 billion, versus $237.5 billion today – then perhaps, just perhaps, we would have had a slim chance of getting out of the enormous hole that Kevin and Julia and Wayne and Lindsay and the Treasury department #JAFA’s have collectively dug for us.

Keating Was Right – US Treasury Secretary A “Gigantic Fool”

6 Aug

US Treasury Secretary Tim Geithner, in April 2011:

Interviewer (1st question): Is there a risk that the United States could lose its AAA credit rating? Yes or no?

Geithner: No risk of that.

Interviewer: No risk?

Geithner: No risk.

This is the chap who our own Paul Keating aptly described as a “gigantic fool” over his bungling of the Asian Crisis in the late 90’s in his then role as Treasury line officer at the genocidal bankster racketeers, the International Monetary Fund.

The same IMF that our Wayne likes to selectively quote … but only when what they say fits with his latest line of BS.

‘Nuff said about the competence of Geithner.

Who is our Treasury secretary, dear reader?

Be afraid.

Be very afraid.

Learn all about our new Treasury secretary, Martin Parkinson, here –

Our New Treasury Secretary Is America’s Mini-Me

By the way.

Keating’s no dummy.

Read what he predicted back in March 2010.

He was absolutely bang on the money –

Global Turmoil Looms: Keating

I Told You So

6 Aug

From Reuters:

The United States lost its top-notch AAA credit rating from Standard & Poor’s on Friday in an unprecedented reversal of fortune for the world’s largest economy.

Five days ago, prior to the US raising their debt ceiling, I wrote this:

Why The US Is Doomed, And The Debt Ceiling “Crisis” Is Irrelevant

If you missed it, click on the link above to see the chart from the New York Times which explains why – whether it be now, or later – the US economy is doomed.

UPDATE:

Dow Jones Newswires comments:

Standard & Poor’s has taken the unprecedented step of downgrading the US government’s “AAA” sovereign credit rating, in a move that could send shock waves through global financial markets and potentially undermine world economic growth.

In a press release, S&P, today cut its top-notch long-term credit rating for the US Treasury’s debt to AA plus with a negative outlook. It is the first time in modern history one of the three main ratings firms has stripped the US of its coveted AAA rating.

S&P warned last month if the US government didn’t approve a credible medium-term plan to shrink its fiscal shortfall, it would downgrade the rating even if Congress approved a debt deal that raised the Treasury’s borrowing limit.

UPDATE 2:

The Wall Street Journal:

A cornerstone of the global financial system was shaken today when officials at ratings firm Standard & Poor’s said US Treasury debt no longer deserved to be considered among the safest investments in the world.

S&P removed for the first time the triple-A rating the US has held for 70 years, saying the budget deal recently brokered in Washington didn’t do enough to address the gloomy long-term picture for America’s finances.

It downgraded US debt to AA+, a score that ranks below Liechtenstein and more than a dozen other countries, and on par with Belgium and New Zealand.

What did then Opposition Finance spokesman Barnaby Joyce say, back in February 2010?

“If you do not manage debt, debt manages you”.

Barnaby is right.

US, UK To Lose AAA Credit Ratings

16 Mar

From Bloomberg:

The U.S. and the U.K. have moved “substantially” closer to losing their AAA credit ratings as the cost of servicing their debt rose, according to Moody’s Investors Service.

“Those economies have been caught in a crisis while they are highly leveraged,” (Moody’s managing director sovereign risk in London, Pierre) Cailleteau said, referring to the level of private and public debt as a percentage of gross domestic product.

Visit the website of Australian Professor Steve Keen, to learn why unprecedented private debt is huge threat to the Australian economy. Even greater than the Rudd government’s ever-growing public debt.

* On April 15th through 23rd, I will be joining Professor Keen in his 230km “Keenwalk” from Parliament House to Mount Kosciuszko, in protest against Australia’s property mania that has been driven directly by insane – and in my personal opinion, immoral – Federal Government and RBA policies, that have enticed hundreds of thousands of financially vulnerable Australians to take on large mortgage debts.

Please consider joining us, for the whole trek or even just for an afternoon section of the walk.

If you’d care to assist a genuinely worthy cause, then please consider sponsoring Professor Keen, or indeed myself. Funds raised will support the wonderful charity Swags For Homeless.

Thanks!

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