Ailing U.S. economy pressures state ratings

Ailing U.S. economy pressures state ratings

www.reuters.com

CHICAGO (Reuters) - U.S. states are likely in for a rash of negative rating actions over the next two years as the ailing U.S. economy continues to hammer their budgets.

"There's going to be more to come," said Richard Larkin, research director at Herbert J. Sims & Co in Iselin, New Jersey, regarding recent rating actions. "This is just the tip of the iceberg."

Just this week, Standard & Poor's Ratings Services warned it could downgrade the general obligation ratings of both California and Illinois. Fitch Ratings revised the outlook on Florida's "AA-plus" GO rating to negative from stable, citing poor economic performance.

Larkin said he expected municipal bond issuers to be hit with rating downgrades over the next year or two.

"I think any state or city that has to issue short-term debt to fund operations...those issuers are the most vulnerable," he said, adding that big note issuers like New York City and State would be on that list.

Chris Mier, a muni analyst at Loop Capital Markets in Chicago, said the belief that states were better positioned to handle an economic slowdown this time around has been shattered as "the rate of the decline in the economy has exceeded anybody's wildest expectations."

He said ratings downgrades could further exacerbate problems in the municipal market that include illiquidity, tax-exempt mutual fund outflows, and bond insurer woes.

(visit the link for the full news article)

Those of you who know me know that I have been warning about this since this whole thing started. I predict that the US will be hit by a wave of government defaults by the 2Q 2009. And I have VERY good reason to think so.

www.abovetopsecret.com...

This post above will explain some of the other factors causing this decline. From this point forward, the more we spend, the harder it will be to avoid a rating drop, which, in this time of crisis, is the last thing America needs.

The thread below is on T-bills literally going ini reverse so that America doesn't actually Look insolvent. But I assure you, the FED and many states are, indeed, becoming insolvent faster than one could have imagined. This is going to be VERY, VERY bad. I know some of you would say this is just more "doom and gloom" but sometimes, that's exactly what we should expect, this is one of those times.
www.abovetopsecret.com...



www.reuters.com
(visit the link for the full news article)

[edit on 13-12-2008 by projectvxn]

[edit on 13-12-2008 by projectvxn]

Sorry for the bump


When these credit ratings start to drop expect the credit card crunch and many banks to fail. Internet commerce will take a HUGE hit because of this, and yes this WILL be what pushes us over the edge into a full blown depression..

But you won't hear the talking heads say that.



[edit on 13-12-2008 by projectvxn]

[edit on 13-12-2008 by projectvxn]

And when individual states credit rating become junk, it will reflect on the entire USA... which are likely already worth Junk...

At the very least, they are not worth AAA... that's just insane considering the production levels of the USA, the debt, the deficits and the insane leadership in power in the White House, yes i include Obama.

Don't forget Obama wants to make a surge in Afghanistan, probably invade Pakistan and probably help Israel bomb Iran...

[edit on 13-12-2008 by Vitchilo]

I agree. Obama's spending plan is going to destroy the dollar. The US is broke. Period. They wouldn't be charging for t-bills if they weren't. This whole thing is a freakin' mess built up by a bunch of lying liars.

I include Obama in there too.

obama's spending plan will put downward pressure on the dollar and this pressure would increase should the fed pull any "funny business" and start to issue it's own bonds like the trial balloon "story" suggested they may do last week.

But one must remember that almost all nations are doing similiar things like the u.s is doing it IS PEAK DEBT and the credit crisis is a symptom of that disease. The dollar may rise during this time and it may fall vs. other currency's or strengthen vs. even some others......but you should look at the price of gold in multiple currency's to see how fast the currency is being devalued.

Read on Obama now almost 500 billions to 1 trillion bail out for America.

While he is trying to fix the economy, without changing the laws that has brought our nation to its kneeds this bail out is going to hurt our economy more.

One of the things on President-elect Barack Obama’s early wish list in the first few days of his administration is a huge stimulus package, reportedly in the area of $500 billion to $1 trillion dollars

While he will be materializing one of his campaigns promises that is all that it may be.

He has proposed creating a digital database that details how each and every dollar of taxpayer money is being spent and this huge infrastructure project provides ample opportunity to do so.

But,

Because a large chunk of that money will be funneled to state and local governments to be spent on infrastructure projects, there are enormous opportunities for waste, fraud and abuse.

Taking into consideration what is going on with the TARP funds I see no difference between the Bush administration bail out and the proposed one from Obama when it comes to abuses.

money.cnn.com...




[edit on 13-12-2008 by marg6043]

yes i would think a large amount of obama's stimulus will go to state and local gov'ts other wise they will need to raise taxes or layoff workers and that would be very bad .......i will be intrested to see how much of the money goes into SPP.GOV / NAU iniciatives roads, etc.


also watch for any attempts to pass the global povery act which may act as a way to disarm the U.S due to the devil in the details included in the UN brainchild bill


to quote cold play " when the future's architectured by a carnival of idiots on show you better lie low"

I can tell you right now who is going to be benefiting from the money in the infrastructure, illegal immigrants, because the are the ones that are the most seek out in the business.

[edit on 2-1-2009 by marg6043]