Re: Newest junk bonds: U.S. Treasuries?

Check out Buchanan today on the same subject:

http://www.worldnetdaily.com/staticarticles/article59693.html

My thoughts:

The British Empire ended in the 40's when GB realized they could no longer
afford it. They cut their expensive occupations, primarily India, loose.

We maintain a thousand military bases overseas. We're about to go through
the same rude awakening.

Currently, the political debate is about how we're going to extend health
care to all citizens. Ideas that involve free market controls are scoffed
at.

We're discussing growing health care programs, but in reality, Medicare (in
its current form) is going away. It can't possibly be afforded.

Those scoffed-at free market controls are going to get tested, like it or
not, because they have one redeeming quality over government solutions:
They're FREE.

JG




"Jim Higgins" <gordian238@xxxxxxxxxxx> wrote in message
news:13ophgirjqa4887@xxxxxxxxxxxxxxxxxxxxx
Newest junk bonds: U.S. Treasuries?
http://www.worldnetdaily.com/news/article.asp?ARTICLE_ID=59692

U.S. Treasuries should be downgraded to junk bond status, not given a
"triple-A" government rating, economist John Williams says, supporting a
warning issued by Moody's last week that the credit rating of the U.S.
government may be plunging in the next decade.

The issue surfaced recently when Reuters published a Moody's warning that
in the next 10 years, the credit rating of the United States is at risk of
being dropped below triple-A.

"We decided to raise the flag," Tom Lemmon at Moody's told WND, "because
the underlying credit rating of the U.S. government faces the risk of
downgrading in the next 10 years if solutions are not found to our growing
Medicare and Social Security unfunded obligations."

Williams, author of the Internet newsletter
ShadowGovernmentStatistics.com, said the credit-rating problem is
immediate, not long-term.

"The U.S. Treasury is currently issuing 10-year notes and 30-year bonds,"
Williams pointed out. "Yes, the U.S. government can always print money,
but the question is whether the investors buying these Treasury securities
will get paid off when they get their money back."

Williams fears the U.S. is going through a period of "stag-flation,"
marked by a combination of slower economic growth accompanied by
inflation, an economic condition the United States has not faced since the
Carter administration and the 1970s.

Additionally, the declining value of the dollar means holders of long-term
U.S. Treasury securities are likely to be paid off in dollars of
considerably reduced value, compared to the value of the dollar at the
time the securities were purchased.

"The total unfunded debt obligations for the federal government, including
the net present value of the future Medicare and Social Security unfunded
obligations, is now nearly $60 trillion," Williams told WND. "This is more
than five times the total Gross Domestic Product of the United States."

"A ratio of 5-to-1 of unfunded debt obligations to GDP is more typical of
third-world country than a triple-A rated country, such as the United
States is supposed to be," he said.

The credit rating of the United States is critical because the federal
government relies on sales of Treasury notes and bonds to finance federal
deficits.

U.S. government securities rated as junk bonds will be much more difficult
to sell to investors including foreign governments, with the result the
bonds will be more expensive for the U.S. to issue, requiring much higher
payouts to induce investors and foreign governments to take the added risk
of repayment.

"The Bush administration has not succeeded with plans to reform Social
Security and has not made serious proposals concerning Medicare, other
than to add on a prescription drug benefit," the Moody's Sovereign Credit
Analysis for the United States noted last week.

The Democrats taking control of Congress in the November 2006 mid-term
elections "ended the prospect of major policy initiatives by the current
administration," the Moody's report concluded.

Nor was Moody's confident Democratic presidential candidates had the
political will to make the needed reforms to Medicare and Social Security,
especially since Hillary Clinton, Barrack Obama and John Edwards have all
promised various forms of universal health care which would increase costs
by giving government-funded health care to those now uninsured.

Medicare and Social Security had been cited as the largest threats to the
long-term financial health of the United States and to the government's
triple-A rating, Moody's analyst Steven Hess told Reuters, as Moody's
issued the report.

The General Accountability Office has also pushed the same alarm button.

David Walker, Comptroller General of the United States, has warned
Congress the federal government's unfunded liabilities in light of growing
Medicare and Social Security obligations soon to be due retiring baby
boomers was $53 trillion as of Sept. 30, 2007. That was up from $20
trillion as of Sept. 30, 2000, some eight months after George W. Bush took
office.

As WND previously reported, the Treasury Department's annual
GAAP-accounted 2007 Financial Report of the United States Government
suggested the real 2007 federal budget deficit was $4 trillion, not $163
billion previously reported by the Bush administration on a cash
accounting basis.

The calculations in the Treasury's 2007 financial report are calculated on
a Generally Accepted Accounting Practices basis that includes
year-for-year changes in the net present value of unfunded liabilities in
social insurance programs such as Social Security and Medicare.

Under cash accounting, the government makes no provisions for the future
Social Security and Medicare benefits in the year in which those benefits
accrue.

The approximately 76 million U.S. citizens born between 1945 and 1964
represent some 28 percent of the U.S. population. In 2008, baby-boomers
born in 1946 will be able to receive their first Social Security payments,
if they opt for early retirement at age 62.

"Simply said, holding revenues constant, required Medicare, Medicaid, and
Social Security spending and the related deficit financing costs will far
exceed the Government's ability to pay," the Citizens' Guide to the 2007
Financial Report of the United States Government concluded.

"The spending for social insurance programs," the Treasury?s Citizen Guide
continued, "is projected to grow at an alarming rate under current law."

The concern about the debt rating of the U.S. makes more problematic the
future payment of Medicare, Medicaid and Social Security obligations that
today are being accrued by about-to-retire baby boomers.

As the 2007 Financial Report of the United States Government pointed out
future Medicare, Medicaid and Social Security obligations are dramatically
unfunded at current obligation levels.

Moreover, the future obligations due retiring baby boomers will have to be
paid by a smaller group of U.S. workers who will have to pay higher yields
to sell downgraded, possibly junk-bond rated U.S. Treasury debt to attract
potential buyers, the critics said.

--
Civis Romanus Sum


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