Well Said By An American Principal to Today’s Newest American Thugs
Canadian Students Disrupt Rent-Seeking F1-Royal Crowds Show in Montreal
Good for them
Bernanke gives little hint that Fed plans action to spur hiring
CEOs Lose Their Optimism as Job Slowdown Imperils U.S. Growth
Europe’s troubles affect wide variety of U.S. firms
The lavish and leveraged life of Aubrey McClendon of Chesapeake
Another clown sent over from England to destroy another American firm.
U.S. rating faces 2013 cut if no credible plan: Fitch
Reuters) – Fitch Ratings reiterated on Thursday it would cut its sovereign credit rating for the United States next year if Washington cannot come to grips with its deficits and create a “credible” fiscal consolidation plan.
It also said it would immediately cut the credit ratings on Cyprus, Ireland, Italy, Spain and Portugal if Greece were to exit the euro zone. Additionally, all euro zone nations would have their ratings put on its negative ratings watch list, setting a six-month time frame for a potential downgrade.
Europe’s ongoing sovereign credit crisis undermines already below-trend growth seen in the United States, the world’s biggest economy.
“The United States is the only country (of four major AAA-rated countries) which does not have a credible fiscal consolidation plan,” and its debt-to-GDP ratio, or how much debt it has relative to the size of the economy, is expected to increase over the medium term, Ed Parker, sovereign ratings analyst, told a Fitch conference in New York.
Lower credit ratings typically lead to higher borrowing costs, putting more strain on government balance sheets already straining to cut spending without sending their economies into a tailspin.
Only in the last week have European leaders broached the prospect of closer economic and political ties to overcome the crisis which has forced severe austerity budgets on Europe’s citizens. German and European Union officials are looking into ways to rescue Spain’s debt-stricken banks even though Madrid has not called for aid and resisted international supervision.
A voter backlash returned a socialist government in France and boosted the chances for the same in Greece which could put its 130-billion-euro international bailout plan in jeopardy.
Fitch revised down its credit outlook for the United States to negative in November from stable after a special congressional committee failed to agree on at least $1.2 trillion in deficit-reduction measures.
At the time it said there was a chance for a U.S. downgrade in 2013, saying the failure of the committee increases the fiscal burden on the next administration.
A change in an outlook sets a 12-18 month time frame for making a decision. A negative outlook signifies there is a greater than 50 percent chance for a downgrade, and vice versa if the outlook is positive.
“The United States is the only one of the four largest economies whose debt as a percentage of GDP is expected to increase over the next five or six years,” Parker said, referring to the United States, Britain, Germany and France.
The U.S. economy’s growth rate in the first quarter was revised down last month to 1.9 percent from a prior estimate of 2.2 percent as businesses restocked shelves at a moderate pace and government spending declined sharply. It grew 3.0 percent in the fourth quarter of 2011.
Standard & Poor’s made history in August 2011 when it cut the U.S. credit rating to AA-plus from AAA. It has held it with a negative outlook ever since.
Moody’s Investors Service has the United States rated at Aaa, also with a negative outlook as of November last year.
All three of the ratings agencies have said they essentially do not expect much change in the U.S. budget situation or fiscal position until after the November presidential election.
The negative outlook from S&P gives it a six-to-24-month window for making a decision while Moody’s defines its time frame as 12 to 18 months.
Fitch respects the size and flexibility of the U.S. economy but the “rising trajectory” of its debt could lead to the same kind of economic stagnancy that has long plagued Japan, Parker said.
Parker said Fitch considers credible the current fiscal plans for Britain, France, Germany and other major AAA-rated nations.
However, he did warn that the firm could cut Britain’s AAA rating if there is a “further material downturn” in its economy.
Fitch, in March, put Britain on a negative outlook, similar to Moody’s Investors Service. S&P has a stable outlook on it.
Parker said Britain, unlike Germany and France, is the most sensitive of Europe’s large economies to the fallout from a Greece exit.
“The euro zone is the UK’s biggest export market” and has many banks with exposure to peripheral countries in the region, Parker said on the sidelines of the conference.
Fitch rates Spain the highest of the three agencies at A, followed by Italy at A-minus; Ireland at BBB-plus; Cyprus at BBB-minus. All of these are at investment grade, save for Portugal’s junk status BB-plus rating. However, all of these ratings currently have a negative outlook.
U.S. Stocks Decline on Europe Concern as Commodities Fall
U.S. stocks retreated, trimming the biggest weekly advance since December for the Standard & Poor’s 500 Index, as commodities slumped and disappointing reports in Europe added to concern about the global economy.
Freeport-McMoRan Copper & Gold Inc. (FCX) and Newmont Mining Corp. (NEM) lost more than 0.6 percent. McDonald’s Corp. (MCD), the largest restaurant chain, slid 1.6 percent as its May sales trailed analysts’ estimates. Facebook Inc. (FB), which this week fell to the lowest price since it went public, added 2.7 percent.
The S&P 500 retreated 0.3 percent to 1,310.57 at 9:56 a.m. New York time. The benchmark gauge for American equities has risen 2.6 percent this week. The Dow Jones Industrial Average declined 27.40 points, or 0.2 percent, to 12,433.56 today.
“Short-term investors aren’t enamored with risk today,” said Lawrence Creatura, who helps oversee $363.6 billion as a Rochester, New York-based fund manager at Federated Investors Inc. “The economic data coming out of Europe just served as a reminder that all is not well yet. On top of that, we’ve had strong days this week and some investors are lightening their positions going into the weekend.”
U.S. equities joined a global slump as German exports dropped in April for the first time this year as weaker global growth curbed demand. French business confidence and Italian output also declined. The trade deficit in the U.S. narrowed in April as a drop in imports overshadowed the first decline in exports in five months.
Investors also watched Europe’s attempts to tame its debt crisis. Spain is poised to become the fourth of the 17 euro-area countries to require emergency assistance as the currency bloc’s finance chiefs plan weekend talks on a potential aid request to shore up the nation’s lenders….
The Price of Inequality and the Myth of Opportunity
Where has there been any budget cutting Dr. Stiglitz? I agree with what you say, except the Government gravy train for wall street, the sp500, and the political and public servant class rolls on, and on, and on, steaming right over the middle class which pays most all of the taxes anyways, when you account for social security, medicare, property, sales and income and gasoline taxes.
By Joseph Stiglitz
June 07, 2012 “Information Clearing House” — America likes to think of itself as a land of opportunity, and others view it in much the same light. But, while we can all think of examples of Americans who rose to the top on their own, what really matters are the statistics: to what extent do an individual’s life chances depend on the income and education of his or her parents?
Nowadays, these numbers show that the American dream is a myth. There is less equality of opportunity in the United States today than there is in Europe – or, indeed, in any advanced industrial country for which there are data.
This is one of the reasons that America has the highest level of inequality of any of the advanced countries – and its gap with the rest has been widening. In the “recovery” of 2009-2010, the top 1% of US income earners captured 93% of the income growth. Other inequality indicators – like wealth, health, and life expectancy – are as bad or even worse. The clear trend is one of concentration of income and wealth at the top, the hollowing out of the middle, and increasing poverty at the bottom.
It would be one thing if the high incomes of those at the top were the result of greater contributions to society, but the Great Recession showed otherwise: even bankers who had led the global economy, as well as their own firms, to the brink of ruin, received outsize bonuses.
A closer look at those at the top reveals a disproportionate role for rent-seeking: some have obtained their wealth by exercising monopoly power; others are CEOs who have taken advantage of deficiencies in corporate governance to extract for themselves an excessive share of corporate earnings; and still others have used political connections to benefit from government munificence – either excessively high prices for what the government buys (drugs), or excessively low prices for what the government sells (mineral rights).
Likewise, part of the wealth of those in finance comes from exploiting the poor, through predatory lending and abusive credit-card practices. Those at the top, in such cases, are enriched at the direct expense of those at the bottom.
It might not be so bad if there were even a grain of truth to trickle-down economics – the quaint notion that everyone benefits from enriching those at the top. But most Americans today are worse off – with lower real (inflation-adjusted) incomes – than they were in 1997, a decade and a half ago. All of the benefits of growth have gone to the top.
Defenders of America’s inequality argue that the poor and those in the middle shouldn’t complain. While they may be getting a smaller share of the pie than they did in the past, the pie is growing so much, thanks to the contributions of the rich and superrich, that the size of their slice is actually larger. The evidence, again, flatly contradicts this. Indeed, America grew far faster in the decades after World War II, when it was growing together, than it has since 1980, when it began growing apart.
This shouldn’t come as a surprise, once one understands the sources of inequality. Rent-seeking distorts the economy. Market forces, of course, play a role, too, but markets are shaped by politics; and, in America, with its quasi-corrupt system of campaign finance and its revolving doors between government and industry, politics is shaped by money.
For example, a bankruptcy law that privileges derivatives over all else, but does not allow the discharge of student debt, no matter how inadequate the education provided, enriches bankers and impoverishes many at the bottom. In a country where money trumps democracy, such legislation has become predictably frequent.
But growing inequality is not inevitable. There are market economies that are doing better, both in terms of both GDP growth and rising living standards for most citizens. Some are even reducing inequalities.
America is paying a high price for continuing in the opposite direction. Inequality leads to lower growth and less efficiency. Lack of opportunity means that its most valuable asset – its people – is not being fully used. Many at the bottom, or even in the middle, are not living up to their potential, because the rich, needing few public services and worried that a strong government might redistribute income, use their political influence to cut taxes and curtail government spending. This leads to underinvestment in infrastructure, education, and technology, impeding the engines of growth.
The Great Recession has exacerbated inequality, with cutbacks in basic social expenditures and with high unemployment putting downward pressure on wages. Moreover, the United Nations Commission of Experts on Reforms of the International Monetary and Financial System, investigating the causes of the Great Recession, and the International Monetary Fund have both warned that inequality leads to economic instability.
But, most importantly, America’s inequality is undermining its values and identity. With inequality reaching such extremes, it is not surprising that its effects are manifest in every public decision, from the conduct of monetary policy to budgetary allocations. America has become a country not “with justice for all,” but rather with favoritism for the rich and justice for those who can afford it – so evident in the foreclosure crisis, in which the big banks believed that they were too big not only to fail, but also to be held accountable.
America can no longer regard itself as the land of opportunity that it once was. But it does not have to be this way: it is not too late for the American dream to be restored.
Joseph E. Stiglitz, a Nobel laureate in economics, has pioneered pathbreaking theories in the fields of economic information, taxation, development, trade, and technical change.
This this article was first published at Project Syndicate
© 2012 Project Syndicate