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Old 08-01-2020, 02:47 PM   #1
Former DJ
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U.S. Gets a Debt Warning From Fitch Ratings Service

https://www.msn.com/en-us/money/mark...ch/ar-BB17qy05

According to a quote in the article, the [projected] Debt-to-GDP ratio is now running at 130 percent. I recall Carmen Reinhardt and Ken Rogoff - in their book "This Time Is Different" - pointing out that, historically, countries with Debt-to-GDP ratios exceeding 125[?] percent tend to suffer ruinous economic consequences.

Of course, I'm no expert on any of this, but I have a feeling if this Coronavirus had struck three months after a Presidential election rather than three months before a Presidential election; politicians wouldn't be falling all over themselves massively increasing the debt. I remember back in the 1970's watching "Wall Street Week with Louis Ruykeyser" every Friday night. He would have guests like Milton Friedman and Alan Greenspan decrying how a budget deficit of $300 billion and "out of control Government spending" runs the risk of bringing our country to its knees. Warren Buffett penned an article for Fortune magazine pointing out that we're eating our seed corn. Now, with budget deficits running [literally] in the trillions, returning to a $300 billion annual deficit would seem like a return to fiscal sanity.

The next President, whoever he is, is going to have to deal with this issue. A failed Treasury auction due to creditor nations refusing to finance our debt out of concerns over a [perceived] inability to meet our obligations ... that would be a real disaster.

It would seem that is what this "warning shot" from Fitch and the other credit rating firms is really saying, (i.e. that there's a limit to how much U.S. politicians can push the fiscal stimulus train before it derails.) I suppose the thinking in Washington is running something along the lines of: "OK, we know running the debt up like a rocket ship is not in our long term best interest. However, this is an emergency! Once we have a vaccine and get this virus under control, we'll return to business as usual. The real problem, right now, is to survive this immediate short term disaster."

Assuming Biden is elected President, I have a feeling it won't take long for his ratings (and popularity) to fall precipitously. If he takes steps to seriously address the debt and control spending - like raising taxes and/or cutting budgets - he'll run into a firestorm of criticism. If he decides to ignore the problem - or hopes we can "grow our way" out of the massive debt - he runs the risk of further credit downgrades. Either way it looks like he's trapped in a Catch 22 dilemma.

This Coronavirus has really screwed us.

Last edited by Former DJ; 08-01-2020 at 03:04 PM.
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Old 08-01-2020, 04:22 PM   #2
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Re: U.S. Gets a Debt Warning From Fitch Ratings Service

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Debt-to-GDP ratio is now running at 130 percent. I recall Carmen Reinhardt and Ken Rogoff - in their book "This Time Is Different" - pointing out that, historically, countries with Debt-to-GDP ratios exceeding 125[?] percent tend to suffer ruinous economic consequences
Japan is well over 200% and hasn't had economic growth since the 90s.
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Old 08-01-2020, 11:16 PM   #3
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Re: U.S. Gets a Debt Warning From Fitch Ratings Service

If your debt is domestically owned by mostly your citizens then you're fine.
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Old 08-01-2020, 11:25 PM   #4
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Re: U.S. Gets a Debt Warning From Fitch Ratings Service

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Assuming Biden is elected President, I have a feeling it won't take long for his ratings (and popularity) to fall precipitously. If he takes steps to seriously address the debt and control spending - like raising taxes and/or cutting budgets - he'll run into a firestorm of criticism. If he decides to ignore the problem - or hopes we can "grow our way" out of the massive debt - he runs the risk of further credit downgrades. Either way it looks like he's trapped in a Catch 22 dilemma.

This Coronavirus has really screwed us.
LOOOL, when was the last time a Democrat was fiscally conservative?

EDIT: If everyone follows her advise by doing this

Quote:
“Charge everything that you can on a credit card,” she said. “Start with the lowest interest credit card that you have, and pay the minimum payment due.”
Then we will have a worse crisis than the one in 2008

https://www.cnbc.com/2020/07/21/suze...than-2008.html

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Old 08-02-2020, 08:00 AM   #5
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Re: U.S. Gets a Debt Warning From Fitch Ratings Service

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LOOOL, when was the last time a Democrat was fiscally conservative
Pretty much every democrat president since at least Clinton has run smaller deficits than the Republican president before or after them.
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Old 08-02-2020, 08:42 AM   #6
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Re: U.S. Gets a Debt Warning From Fitch Ratings Service

Still no competition to the US Dollar globally though.
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Old 08-02-2020, 09:27 AM   #7
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Re: U.S. Gets a Debt Warning From Fitch Ratings Service

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Pretty much every democrat president since at least Clinton has run smaller deficits than the Republican president before or after them.
So only Obama?

Clinton and Obama both followed wars so they had the benefit of cutting that spending dramatically. If you exclude those costs they spent more. The premise of democratic platforms is increase federal benefits to citizenry and if you think during a recession any democratic candidate would not expand the budget you are being unrealistic.
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Old 08-02-2020, 04:39 PM   #8
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Re: U.S. Gets a Debt Warning From Fitch Ratings Service

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Japan is well over 200% and hasn't had economic growth since the 90s.
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If your debt is domestically owned by mostly your citizens then you're fine.
+1


when do we start seeing adverse effects from too much debt owed to citizens, for instance pensions disappearing? what are other potential consequences?
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Old 08-02-2020, 09:56 PM   #9
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Re: U.S. Gets a Debt Warning From Fitch Ratings Service

This was a negotiating tactic from the GOP, nothing more. Not much value imo. The Democrats have all the leverage and know exactly where they stand in stimulus negotiations.

Absolutely zero chance U.S. ratings agencies would ever downgrade U.S. sovereign debt, even if the Treasury is insolvent. I'm sure you can figure out why.
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Old 08-02-2020, 11:56 PM   #10
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Re: U.S. Gets a Debt Warning From Fitch Ratings Service

The rating agencies are ****ed up. Still the USA spending is ridiculous.
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Old 08-03-2020, 12:31 AM   #11
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Re: U.S. Gets a Debt Warning From Fitch Ratings Service

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So only Obama?

Clinton and Obama both followed wars so they had the benefit of cutting that spending dramatically. If you exclude those costs they spent more. The premise of democratic platforms is increase federal benefits to citizenry and if you think during a recession any democratic candidate would not expand the budget you are being unrealistic.
Clinton took over a massive debt and left a surplus....the one thing he was undeniably good at was managing the economy.

Unfortunatley, he sold out to corporations and reduced competition, allowed more and more money to flow into politicians, and allowed monopoly laws to be rolled back. Obviously wan't all on him, but that was the way the game was to be won. Reagan paved the way for that being the first corporate bought puppet.
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Old 08-03-2020, 02:05 AM   #12
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Re: U.S. Gets a Debt Warning From Fitch Ratings Service

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Clinton took over a massive debt and left a surplus...
Republicans controlled both the house and senate in the Clinton years. I think it was def more them not him.

https://www.cato.org/publications/co...balance-budget
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Old 08-03-2020, 06:42 AM   #13
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Re: U.S. Gets a Debt Warning From Fitch Ratings Service

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Republicans controlled both the house and senate in the Clinton years. I think it was def more them not him.

https://www.cato.org/publications/co...balance-budget
True plus Clinton’s triangulation strategy. One huge factor, very often overlooked though, is the surge in federal government revenue in late nineties due to increases from capital gains taxes. Stock market was hot. The feds collected around 20% of GDP in revenue. The Simpson-Bowles commission that Obama commissioned put forth ideas on how to collect more revenue and do less spending to come close to a balanced budget every year. The revenue target was 20% of GDP. Neither Republicans nor Democrats took it seriously though. Too much pain to sell politically. So here we are 10+ years later with this debt level.
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Old 08-03-2020, 09:28 AM   #14
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Re: U.S. Gets a Debt Warning From Fitch Ratings Service

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Clinton took over a massive debt and left a surplus...
This is untrue.
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Old 08-04-2020, 09:39 AM   #15
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Re: U.S. Gets a Debt Warning From Fitch Ratings Service

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Old 08-04-2020, 10:17 AM   #16
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Re: U.S. Gets a Debt Warning From Fitch Ratings Service

That's one hell of a confusing chart.
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Old 08-04-2020, 12:47 PM   #17
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Re: U.S. Gets a Debt Warning From Fitch Ratings Service

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Originally Posted by Jion_Wansu View Post
LOOOL, when was the last time a Democrat was fiscally conservative?

EDIT: If everyone follows her advise by doing this



Then we will have a worse crisis than the one in 2008

https://www.cnbc.com/2020/07/21/suze...than-2008.html
WTF?

oh you must watch Fox and Friends.

See the above graph. It is really ONLY Dem POTUS' who decrease deficit spending almost always after taking over from a Republican POTUS who exploded it upward prior.
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Republicans controlled both the house and senate in the Clinton years. I think it was def more them not him.

https://www.cato.org/publications/co...balance-budget
Ya, naw.

Yes the republicans in charge of the Houses love it when a Dem POTUS sets a course that will reduce deficit. It starts them drooling about how much they will have to spend when a Repub POTUS gets in. But there is no denying, if you have a Repub POTUS and especially supported by Repub in the HOuse, they are going to be running huge deficits.


The only time you will see Deficits shrinking is with a Dem setting the course in the WH. But sure, Repub's will support that. Why wouldn't they?
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Old 08-04-2020, 01:53 PM   #18
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Re: U.S. Gets a Debt Warning From Fitch Ratings Service

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That's one hell of a confusing chart.
What do you find confusing? It seems quite clear to me and most importantly provides context to this discussion, as many times people want to assess these times as if in a bubble, when what you inherit from the prior Admin, matter a lot.

What you said was 'untrue' in your prior post was probably the error of saying 'debt' instead of 'deficit' and you can see it IS true if adjust for that word.

You can see Bush Sr was running significant deficits each and every year that were getting worse, and Clinton came in and turned that right around.

You can see Bush JR handed Obama a horrid situation which he quickly turned around. And you can see how Trump,if he loses will pass on to Biden a terrible situation.
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Old 08-04-2020, 02:57 PM   #19
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Re: U.S. Gets a Debt Warning From Fitch Ratings Service

Changing debt to deficit is one hell of a change, no? Also, the post continued with "left a surplus". That isn't true no matter how much word choice gymnastics you do.

As for the chart, yes, if you look real hard, it shows what you say, but stacked bar charts like that are rarely readable. Even less so when so when you want to show a cumulative situation.

Also, you do know that the President of the US neither sets the budget, approves appropriations, or determines revenue, don't you? Presidents get way to much credit or blame for what their powers actually are.
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Old 08-04-2020, 03:26 PM   #20
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Re: U.S. Gets a Debt Warning From Fitch Ratings Service

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Changing debt to deficit is one hell of a change, no? Also, the post continued with "left a surplus". That isn't true no matter how much word choice gymnastics you do.

As for the chart, yes, if you look real hard, it shows what you say, but stacked bar charts like that are rarely readable. Even less so when so when you want to show a cumulative situation.

Also, you do know that the President of the US neither sets the budget, approves appropriations, or determines revenue, don't you? Presidents get way to much credit or blame for what their powers actually are.
I just think it was fairly clear he was misusing terms, but he can correct me if I am wrong.

And while I agree minorly, I think it far more common to try and take credit away from the POTUS and diminish the influence they have. This was Trump's last 3.5 years of budget direction. That was Obama's 8 years, and so on.

Their power is substantial and should not be underestimated.
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Old 08-04-2020, 04:05 PM   #21
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Re: U.S. Gets a Debt Warning From Fitch Ratings Service

Waiting for that last round of tax cuts to pay for itself... Or the round before it.

Pretty obvious we need to bring taxes back to the pre-Bush rates and gradually reduce military spending.

Single payer healthcare will be labeled too expensive by Republicans but it is the only way to keep growth in healthcare spending from financially ruining the country.

None of this is happening unless Democrats get a 61 or 62 vote majority in the Senate (which they won't) or do away with the filibuster as guys like Manchin won't be voting for major progressive changes.
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Old 08-04-2020, 04:31 PM   #22
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Re: U.S. Gets a Debt Warning From Fitch Ratings Service

Re credit score, there is no risk of default. The US can pay all US dollar debts as it can just keep printing its own currency.
The ROI of such loans is another issue, but that's not what the credit score rating should be concerned with.
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Old 08-05-2020, 08:55 AM   #23
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Re: U.S. Gets a Debt Warning From Fitch Ratings Service

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Re credit score, there is no risk of default. The US can pay all US dollar debts as it can just keep printing its own currency.
The ROI of such loans is another issue, but that's not what the credit score rating should be concerned with.
I am not sure the unlimited printing mill thesis is apt. I think that leads to the ill fated road Greece and Italy and others went down.

If the theory is that the US can just keep issuing unlimited debt (currently over 50% held by Foreign Gov'ts and institutions) and just print unlimited new currency to pay it back, the US will enter a spiral where the currency will become so devalued it will become increasingly impossible to catch up.

Once your debt repayment requires you to repay the debt with increasing amounts of new debt, instead of it being offset by economic growth, the trap is locked in, and much tougher measures, like Greece and italy had to go through become necessitated.
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Old 08-05-2020, 09:01 AM   #24
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Re: U.S. Gets a Debt Warning From Fitch Ratings Service

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I remember back in the 1970's watching "Wall Street Week with Louis Ruykeyser" every Friday night. He would have guests like Milton Friedman and Alan Greenspan decrying how a budget deficit of $300 billion and "out of control Government spending" runs the risk of bringing our country to its knees. Warren Buffett penned an article for Fortune magazine pointing out that we're eating our seed corn. Now, with budget deficits running [literally] in the trillions, returning to a $300 billion annual deficit would seem like a return to fiscal sanity.
(

How about we bring back the Milton Friedmans of the world to the TV?

Until the public gets economic education, the US is in big big trouble.
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Old 08-05-2020, 09:43 AM   #25
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Re: U.S. Gets a Debt Warning From Fitch Ratings Service

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I am not sure the unlimited printing mill thesis is apt. I think that leads to the ill fated road Greece and Italy and others went down.

If the theory is that the US can just keep issuing unlimited debt (currently over 50% held by Foreign Gov'ts and institutions) and just print unlimited new currency to pay it back, the US will enter a spiral where the currency will become so devalued it will become increasingly impossible to catch up.

Once your debt repayment requires you to repay the debt with increasing amounts of new debt, instead of it being offset by economic growth, the trap is locked in, and much tougher measures, like Greece and italy had to go through become necessitated.
Greece, Italy ... have to borrow using a currency they cannot control.
Again, the bonds could become a horrible investment but they will be repaid.
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