Puerto Rico hurtles toward default

Government could run out of cash in 3 months

A severe liquidity crisis that threatens to shut down Puerto Rico’s government is making life difficult for U.S. municipal bond investors.

The island territory has been labeled “America’s Greece.” Its $73 billion in bonds trading in the U.S. municipal-bond market carry junk ratings and are trading at record-high yields.

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Gazprom’s AAA Credit Rating Ensures Cheap Credit for China Projects

What Russian and China basically did was create new rating agencies to give each other legitimacy. Here we now have the end result. As the U.S. suicidally declines, look for these to gain traction.

 

MOSCOW, February 2 (Sputnik) — Gazprom’s AAA investment rating with Chinese rating agency Dagong will help reduce the costs of obtaining Chinese loans, which in turn will help to ensure the completion of the energy companies’ projects with China, BCS financial analyst Kirill Tachennikov told Sputnik on Monday. Continue reading

Fitch warns it may lower U.S. credit rating

Fitch has placed its “AAA” U.S. credit rating on “rating watch negative,” a step that would precede an actual downgrade. The agency said it expects to conclude its review within the next six months. The firm says it expects the debt limit will be raised soon, but adds, “the political brinkmanship and reduced financing flexibility could increase the risk of a U.S. default.” Continue reading

US default risk is real, Washington warns Wall Street

Money lenders trust America so implicitly that they generally dismiss the risk it won’t pay its debts. But in the US capital, fears are growing that political dysfunction might trigger the unthinkable.

A few years ago one would have said, ‘Don’t be silly. Of course they will raise the debt ceiling.’ But one can’t say that any more.  

Government veterans from both political parties are aghast that lawmakers openly speak of managing a default that could be triggered next month if they don’t authorise more borrowing. Continue reading

Fitch downgrades European rescue fund EFSF

Fitch Ratings has cut its credit grade for the European fund that provides rescue loans to Greece, Ireland and Portugal.

The agency says it lowered the rating for the European Financial Stability Facility – or EFSF- by one notch from AAA to AA+ as a result of its downgrade of France last week. The EFSF’s creditworthiness depends on that of the countries that provide its financing, which includes France. Continue reading

Detroit’s Default May Spark U.S. Death Spiral of Debt

Debt is deadly, and it’s made even worse with rising interest rates that can prevent you from eliminating the load. What happens with rising interest rates is that more of the payments go toward the interest and less to the principal. In fact, it’s what I call a death spiral of debt that worsens as rates move higher.

When individuals face excessive debt, often the solution is to reduce spending and adhere to a strict repayment program. Continue reading

Money flies out of Spain, regions pressured

The unraveling of Europe is set to accelerate. Will Germany come to the rescue in exchange for sovereignty?

Spaniards alarmed by the dire state of their banks are squirreling money abroad at the fastest rate since records began, figures showed on Thursday, and the credit ratings of eight regions were cut.

Bank of Spain data showed a net 66.2 billion euros ($82.0 billion) was sent abroad last month, the most since records began in 1990. The figure compares to a 5.4 billion net entry of funds during the same month one year ago.

Full article: Money flies out of Spain, regions pressured (Reuters)

But Aren’t We Joined at the Hip with China?

Another very common objection raised to the Economic Warfare reality is based on the misperception that China is so connected to our economy that “they” would never harm us. [Of course, these are the same people who said that America would never lose our Triple-A Credit Rating.] The idea that “the Chinese” would never harm us is ridiculous on its face, given the proven reality that there are Chinese who continually hack our systems, manipulate and undermine our markets. There is ample evidence of that. The whole concept is rather naive, assuming that all Chinese are the same. Certainly the average businessperson in China might not want harm to our economy. But, how about the PLA (People’s Liberation Army)? We addressed this in our posts titled “Which Chinese?” and “Which Chinese Part 2.”

“Here in the U.S. you may hear many people worry that the Chinese government might stop buying American T-Bills. I think those fears are vastly overblown. The economic situation between China and the U.S. is the financial version of mutually assured destruction…”

Basically, this theory is based on the idea that the Chinese hold so much in dollar debt that they couldn’t afford to see the dollar go down. Here’s the problem. The military doesn’t care. They have a much longer view of things than the next quarter’s export sales. The smug response of those who believe China needs us so much that they must always stay friends is just another example of American arrogance. Now, there is further evidence of what we have been saying all along. We have no idea about what China really holds in dollar debt. They have so many ways to obscure their holdings that we can’t ever be certain. This from the March 2, 2012 Wall Street Journal cover story (Beijing Diversifies Away From U.S. Dollar):

Full article: But Aren’t We Joined at the Hip with China? (Kevin Freeman / Global Economic Warfare)