Former Sen. Judd Gregg (R-N.H.) who was a senior member of the Budget and Banking committees when he was in the Senate, said that the financial future of our country is grim if lawmakers don’t seriously address the federal government’s budget deficit.

The Greek situation is “not that different from ours,” he said at the first day of the 2011 REALTORS® Midyear Legislative Meetings & Trade Expo in Washington.

The U.S. government debt is fast approaching the $14.3 trillion ceiling, with the debt-to-GDP ratio close to 100 percent.

Weiss Ratings, an independent rating agency of U.S. financial institutions and sovereign debts, has downgraded the debt of the United States government from C to C-minus.

The C-minus rating for the U.S. reflects a continued deterioration in the weaknesses cited in the Weiss Ratings release of April 28, 2011, including heavy debt burdens, shaky international stability, and poor economic health.

Weiss Ratings (*) senior financial analyst Gavin Magor commented: “Our downgrade today is not contingent on the outcome of the debt ceiling debate in Washington. It is driven exclusively by the numbers, which indicate that, in addition to a decline in the long-standing weaknesses we noted three months ago, the U.S. has already lost the golden halo that helped guarantee liquidity and acceptance of its government securities in global markets.”

On the Weiss Ratings scale, which ranges from A (excellent) to E (very weak), a C-minus rating is the approximate equivalent of a triple-B-minus on the scales used by other credit rating agencies, or approximately one notch above speculative grade (junk).

In September 2010 Moody’s Investors Service raised Costa Rica’s government bond rating from Ba1 (considered “speculative”) to Baa3 which is considered investment-grade. The outlook on the new rating is stable.

Unlike most rating agencies, Weiss Ratings is an independent provider of financial strength ratings and accepts no payments for its ratings from rated entities. By adhering to its independent business model, Weiss outperformed Standard and Poor’s, Moody’s, A.M. Best and Duff & Phelps (now Fitch) in warning of future life and health insurance company failures according to a 1994 study by the U.S. Government Accountability Office (GAO), while also outperforming its competitors in identifying the safest insurers, according to its follow-up study using the GAO’s research methodology. Similarly, Weiss was the only one to identify, in advance, nearly all major banks that failed or required a federal bailout in the 2008-2009 debt crisis.

Earlier this year the Senate Permanent Subcommittee on Investigations issued a report that blamed the two ratings firms in the orgy of speculation and swindling that led to the financial debacle, noting: “It was not in the short-term economic interest of either Moody’s or S&P, however, to provide accurate credit ratings for high-risk RMBS (residential mortgage-backed securities) and CDO (collateralized debt obligations) securities, because doing so would have hurt their own revenues.”

In February 2011 Jeremy Frommer summed it up nicely when he stated that: “The rating agencies are a joke. They missed the sub-prime mess, missed Europe, they are missing our own domestic municipalities’ problems, and they have zero understanding of how the events in the Middle East will affect the credibility of every emerging market capital structure. What value do the rating agencies serve?”

The USA: “… It Looks Like You’re Coming to a Third World Country…”

Noam Chomsky writes that: “Another example, which is kind of a scandal in the United States — if any of you have traveled abroad, you’re perfectly aware of it — when you come back from almost anywhere in the world to the United States, it looks like you’re coming to a Third World country, literally. The infrastructure is collapsing transportation that doesn’t work. Let’s just take trains. When I moved to Boston around 1950, there was a train that went from Boston to New York. It took four hours. There’s now a highly heralded train called the Acela, the supertrain. It takes three hours and forty minutes (if there’s no breakdown — as there can be, I’ve discovered). If you were in Japan, Germany, China, almost anywhere, it would take maybe an hour and a half, two hours or something. And that’s general.”

And it’s not getting better any time soon…

  1. The number of home owners who owe more on their mortgage than their house is worth continues to increase. About 28 percent of homes with mortgages are now underwater
    , according to Zillow.com’s latest Home Value Index. That is up from 27 percent reported during the last three months of 2010.

  2. According to ShadowStats which many consider to be infinitely more trustworthy than any government source, the real unemployment figure in the USA is probably closer to 23%
  3. This Is What A Collasping Ponzi Scheme Looks Like: Housing Market Headed Off A Cliff As A Shocking 10.8 Million Mortgages At Risk Of Default
  4. Almost half of mortgages in Arizona are ‘underwater,’ report says.

    5. i>The $1 Billion Armageddon Trade Placed Against The United States

“I do not understand, though, that if the debt is the problem — and I agree, the debt is the problem — that for us to come here and raise the debt by 2.4 trillion dollars is the solution. That just baffles me.” Dr. Ron Paul.

What homeowners and real estate buyers sitting on the sidelines are forgetting right now is the monthly payment. Some people assume that mortgage rates will remain low – which is extremely unlikely. If real estate prices remain the same and mortgage rates only rise from 4.5% to 5.5% – a mere 1% – it would cost the buyer 12% more cash per month to pay the mortgage and if mortgage rates rose from 4.5% to 6.5% your mortgage payment will increase by 25%.

Weiss began tracking sovereign debt last year. France and Japan also got a “C” rating, while Only China and Thailand received an “A” rating.

S&P also formally warned that unless Congress can get the $1.5 trillion budget deficit in line, there is now a 1/3 chance that the United States could lose its pristine AAA rating by 2013.

For at least five years these agencies have been warning that America’s AAA bond rating isn’t guaranteed. Any downgrade would send shock waves throughout the entire financial system because so many bonds are priced off of equivalent Treasuries, which are assumed to have zero risk of default. Thus a rise in Treasury rates, which would necessarily follow from a credit rating downgrade, would automatically raise other interest rates.

The Plan To Solve The Debt Problem

The US government has expanded the national debt by eleven trillion dollars just over the past ten years and that doesn’t include the entitlement obligations which are much more and what’s their plan?

Their plan is to increase the debt limit by $900 billion and calls for at least $2.4 trillion in spending cuts over 10 years which will be about as effective as giving a chronic alcoholic a case of his favourite liquor to solve his alcohol problem!

On 29th July 2011 Dr. Ron Paul spoke about how; “today we have an inflation rate of 9%” and said that: “Mr. Speaker, the Congress is concerned about the debt. The people are concerned about the debt. The markets are concerned about the debt. The world is concerned about the debt.”






Losing your rating or being downgraded can have a fatal effect on your country’s ability to borrow money on the markets.

The USA is the world’s largest economy and largest trading partner with Central America, so the situation is being watched closely by various policymakers in the region.

Fernando Delgado, IMF representative for Central America, Panama and the Dominican Republic, believes that “the region would be very badly affected (if the U.S.’s rating were lowered), but we think it is very unlikely to happen. But if it did happen, it would be catastrophic, it would be like a scale force 10 earthquake.”

Remember those fateful words of a certain Senator Barack H. Obama way back in March 2006?

“The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the US Government can not pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. Increasing America’s debt weakens us domestically and internationally. Leadership means that, “the buck stops here.’ Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.”

Paul Krugman in the New York Times believes that: “… it will take America a long way down the road to banana-republic status…” And he adds that: “Make no mistake about it, what we’re witnessing here is a catastrophe on multiple levels.”

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Written by Scott Oliver, author of 1. Costa Rica Real Estate Scams & How To Avoid Them, 2. How To Buy Costa Rica Real Estate Without Losing Your Camisa, 3. Costa Rica’s Guide To Making Money Offshore and 4. ¿Cómo Comprar Bienes Raices en Costa Rica, Sin Perder Su Camisa?

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