Standard & Poor’s (S&P) has downgraded their U.S. Government long-term AAA debt rating to AA+ for the first time since granting it in 1917. While forewarned, it still seems to have taken investors by surprise. Fitch and Moody’s recently re-affirmed their top-tier rankings of U.S. long-term debt, however. We do not expect S&P’s downgrade will have much impact on interest rates or the sale of Treasuries to finance U.S. borrowing, particularly if both Moody’s and Fitch continue to maintain their current top-tier ratings. The consequences of S&P's U.S. Government downgrade will likely have a greater emotional impact on investor sentiment, exacerbated by the European chaos, than any longer term impact on the economy or fixed income liquidity.
Learn more from NIFCU$ at http://www.nafcu.org/nifcus
The next President will need to confront a number of budgetary challenges and will likely sign into law many federal tax and spending changes. Yet too often, election campaigns are about telling voters what they want to hear rather than what they need to know. To separate fiction from reality, the new Fiscal FactChecker series will monitor the 2016 Presidential campaign on an ongoing basis. To start with, we have identified 16 myths that may come up during the campaign.
In this issue:
1. TD Wealth Asset Allocation Committee: Market outlook: the year ahead
2. TD Economics: A foundation for uncertain times
3. TD Wealth: New principal residence exemption rules
Market Outlooks
We leverage a global network of investment consultants and researchers to deliver industry specific knowledge and dynamic tools, which allows our clients to make informed strategic investment decisions.
The next President will need to confront a number of budgetary challenges and will likely sign into law many federal tax and spending changes. Yet too often, election campaigns are about telling voters what they want to hear rather than what they need to know. To separate fiction from reality, the new Fiscal FactChecker series will monitor the 2016 Presidential campaign on an ongoing basis. To start with, we have identified 16 myths that may come up during the campaign.
In this issue:
1. TD Wealth Asset Allocation Committee: Market outlook: the year ahead
2. TD Economics: A foundation for uncertain times
3. TD Wealth: New principal residence exemption rules
Market Outlooks
We leverage a global network of investment consultants and researchers to deliver industry specific knowledge and dynamic tools, which allows our clients to make informed strategic investment decisions.
In November 2011, after months of debate, Congress was unable to arrive at an agreement to gradually reduce
the U.S. deficit. As a result, they deferred any decision by implementing a process called sequestration, scheduled
to take effect in January 2013. This draconian option was thought sufficient to motivate both political parties to
focus on resolving their differences. It was never intended to actually take effect, as it will trigger across- the- board
spending cuts of $1.2 trillion over 10 years to both domestic and defense programs. For more info: www.nafcu.org/nifcus
The quarterly CFO Survey is firmly established with media and policy makers as the authoritative barometer of UK corporates’ sentiment and strategies. It is the only survey of major corporate users of capital that gauges attitudes to valuations, risk and financing.
Despite hopes that the anti-QE rhetoric would die down, the noise continued last week, and unfortunately, become more political. One of the key aspects of the Fed is its independence. The Fed is answerable to Congress, and ultimately, to the American people. However, it is not controlled by Congress – nor would we want it to be controlled by Congress. Attacks on the Fed and its latest round of asset purchases aren’t helping.
Rarely has there been more uncertainty regarding the course of the public finances over the next five years. In this note we aim to answer some of the big questions for the economy in light of the 2021 budget.
Rarely has there been more uncertainty regarding the course of the public finances over the next five years. In this note we aim to answer some of the big questions for the economy in light of the 2021 budget.
In November 2011, after months of debate, Congress was unable to arrive at an agreement to gradually reduce
the U.S. deficit. As a result, they deferred any decision by implementing a process called sequestration, scheduled
to take effect in January 2013. This draconian option was thought sufficient to motivate both political parties to
focus on resolving their differences. It was never intended to actually take effect, as it will trigger across- the- board
spending cuts of $1.2 trillion over 10 years to both domestic and defense programs. For more info: www.nafcu.org/nifcus
The quarterly CFO Survey is firmly established with media and policy makers as the authoritative barometer of UK corporates’ sentiment and strategies. It is the only survey of major corporate users of capital that gauges attitudes to valuations, risk and financing.
Despite hopes that the anti-QE rhetoric would die down, the noise continued last week, and unfortunately, become more political. One of the key aspects of the Fed is its independence. The Fed is answerable to Congress, and ultimately, to the American people. However, it is not controlled by Congress – nor would we want it to be controlled by Congress. Attacks on the Fed and its latest round of asset purchases aren’t helping.
Rarely has there been more uncertainty regarding the course of the public finances over the next five years. In this note we aim to answer some of the big questions for the economy in light of the 2021 budget.
Rarely has there been more uncertainty regarding the course of the public finances over the next five years. In this note we aim to answer some of the big questions for the economy in light of the 2021 budget.
Succession Planning: Developing an Internal Search Process (Credit Union Conf...NAFCU Services Corporation
Ensuring that credit unions have the leadership and talent needed for future success is a critical responsibility of current CEOs and boards. As baby boomers approach retirement, the careful planning for the eventual replacement of top leadership has gained strategic importance. In this 2011 NAFCU Annual Conference session you learn how to develop a candidate profile based upon the current and future needs of your credit union, identify and assess internal candidates, ensure their continued commitment and outline a competitive compensation package.
Presented by Loretta Dodgen, Ed D., Consultant and Managing Partner, Human Capital Solutions Group
More info at http://www.nafcu.org/hcsgroup
Quest for Knowledge: MOOCs Provide Insigts to InnovationJay Gendron
Massive open online courses (MOOCs) could solve old problems in new ways. More than ever, people need access to knowledge. Since the earliest of days, this has been a never-ending quest. This paper looks at the knowledge process from the domain of education in order to stimulate innovation and advancement in another source of knowledge – modeling and simulation. This paper explores knowledge, starting with the innovations that propelled MOOCs to their current position in the marketplace. It then offers a framework based on current studies and draws parallels to modeling and simulation, probing the questions as to how modeling and simulation can learn from MOOCs so decision makers have greater access to knowledge more directly and easily through modeling and simulation tools as well as the discipline formed by that community. Today's modeling and simulation leaders need awareness of the MOOC business model and the potentially high returns on investment when integrating models and tools to solve new problems.
As Fed tapering unfolds, we expect to see stronger growth from developed markets, while emerging markets in aggregate may experience further currency and capital market weakness. In the United States, declining labor participation continues to drive falling unemployment figures, and may harbor the beginning of a wage inflation surprise.
• We expect credit, liquidity, and prepayment risks will continue to
be rewarded by the market in the months ahead, while interestrate
risk remains unattractive due to its asymmetric risk profile.
If U.S. politics do not derail the recovery, pent-up demand can drive faster economic growth. Fixed-income outflows appear likely to continue, pushing rates higher.
Based on the data provided through the U.S. Department of the Treasu.pdfarhamnighty
Based on the data provided through the U.S. Department of the Treasury, is the public debt of the
U.S. government increasing or decreasing? What impact will this trend have on the budget of the
federal government and on the U.S. economy as a whole? PLEASE BE SPECIFIC
Solution
As per the data provided or accessed through the US Department of the Treasury, the public debt
of US government is increasing.
For instance, total public debt of US government in 2012 was $15.5 trillion which increased to
$18.2 trillion in 2015 and is expected to increase to $20.6 trillion in 2019.
Rising public debt of US government implies rising debt-servicing obligations of the US
government.
In other words, interest payment obligations of US government will rise.
With US economy, still, not fully recovered from 2007-2009 recession and government spending
already on a high, this increase in interest payments or debt servicing obligations will keep the
budget of federal government in deficit in coming time period as well.
This deficit will induce the US government to borrow more. This will displace the private
borrowings and there by private investment. If government utilizes the additional borrowings for
productive purposes then loss due to displacement of private investment can be minimized and
US economy as a whole will grow.
However, as stated above, rising public debt indicates that interest payment obligations will also
rise. Interest payments are generally non-developmental in nature. So, good part of additional
borrowings will go towards such endeavors and this coupled with displacement of private
borrowings and investment will slow down the growth of US economy..
Agcapita July 2013 - Central Banking's Scylla and CharybdisVeripath Partners
While I believe that eliminating QE is the right thing to do for the long-term health of the economy, the recent equity and bond market declines are but modest harbingers of the unintended short-term consequences that the Fed’s prolonged ZIRP/QE program and its termination will wreak – rollover and convexity risk. These are the proverbial pigeons that will come home to roost if the US Federal Reserve stops its massive bond-buying spree and rates normalize.
Laurentian Bank Securities - Economic Research and Strategy Mark MacIsaac
LBS Asset Allocation Model – September Update:
Global economic data remained robust in August and continue to point to solid, broad-based and synchronized economic expansion. Financial conditions also remain easy and still provide a supportive environment for economic growth.
The presidential campaign can be an excellent opportunity to engage in a frank, constructive dialogue about the nation's fiscal challenges and what to do about them. Of course, it is much easier to rely on well-worn myths than to explain complex concepts and propose ideas that voters may not like. That’s why we published "16 Budget Myths to Watch Out for in the 2016 Campaign."
Learn from the largest subservicer how best to evaluate and select the right subservicing partner for your credit union based on your portfolio, investor mix, product range and other key selection factors.
Nearly one-third of Americans surveyed by Securian Financial Group say they haven’t thought about what would happen to their debt if they – or their cosigners – were to pass away unexpectedly. Fewer than 13 percent say they have taken steps to protect themselves from the sudden loss of a borrower.
With the tsunami of new regulations from NCUA and the CFPB, getting good at compliance is becoming a key success factor for credit unions. In this podcast and presentation from the 2013 NAFCU Annual Conference, Toné Gibson explores how your credit union can develop a cost-effective approach to strike a better balance between compliance and operational efficiency. Through the utilization of three methodologies – strategic development, process excellence, and performance management – learn in detail how to reduce the cost of compliance.
Wolters Kluwer Financial Services is the NAFCU Services Preferred Partner for Consumer and Member Business Lending & Deposit Services. More educational resources and contact information are available at www.nafcu.org/wolterskluwer.
Consumers are willing to pay for services that they find either adds convenience or delivers value. In this podcast and presentation from the 2013 NAFCU Annual Conference, Dave Schneider, Brent Dixon, and Paul Muse discuss how to expand your credit unions credit and debit opportunities and explore innovative products that can help guide your future credit union operations, including new approaches to increasing penetration, activation, and usage of the fundamental card. Also, learn to leverage new payment options that will appeal to Gen Y consumers, including Internet PIN debit, PINless at the point of sale, and payments and delivery of service through mobile.
Succession planning is the right people at the right time doing the right work. In this podcast and presentation from the 2013 NAFCU Annual Conference, Deedee and Peter discuss how you can develop a strategic organization successional plan to ensure the successful transition of key leadership for your credit union. This session covers an overview and best practices, levels and types planning, board evaluation, behind the scenes conversions, and the integration of board succession planning with CEO succession planning.
Rising Above Uncertainty: Opportunities and Challenges for Credit Unions in P...NAFCU Services Corporation
The retail financial services market is in a transformative period where new stakeholders and business models are reshaping the industry. Credit unions still have the opportunity for retention and growth, but must continue to compete. In this presentation, you will get an in-depth look at key market dynamics, including evolving financial services models and regulatory impact; learn about emerging strategies and their impact to credit unions, including EMV, prepaid, and mobile; and find out how to prepare for the future.
In this presentation from the 2013 NAFCU Annual Conference, Barrett Burns provides a comprehensive analysis of credit score models and discusses how your credit union can utilize them for member outreach and education.
Listen to the full podcast here: http://www.nafcu.org/NAFCU_Services_Corporation/Partner_Library/Credit_Scores__What_s_Behind_the_Number___Podcast_and_Presentation_/
2013 NAFCU BFB Survey of Executive Compensation and Benefits (Presentation Sl...NAFCU Services Corporation
First introduced in 2007, the NAFCU-BFB Survey of Federal Credit Union Executive Benefits and Compensation was created to better understand the compensation and benefits for the top five executives of Federal credit unions. For more info: www.nafcu.org/bfb
Study Confirms Debit Strength, Reveals Reward Trends (Payment Choice Study Re...NAFCU Services Corporation
TSYS partnered with Mercator Advisory Group to conduct the 2012 Consumer Debit Payment Choice Research Study. This unique study combines survey questions and focus groups, enabling researchers to have an interactive discussion with participants about payment choices and influences, technology awareness and overall user experiences. Learn more at: www.nafcu.org/discover
Before you embark on the critical path of defining (or redefining) your mortgage strategy, there are five basic truths you need to know and build into your planning. From expenses and technology to people and process, these truths are an essential part of any mortgage discussion. This webinar shares the research behind each tenet and how you can incorporate them into your strategy. Learn more at: www.nafcu.org/morgtagecadence
There is an unprecedented focus today around the future of retail branch networks. Credit union executives are seeking new ways to economically alter the scale, reach, and character of their branch assets to drive growth and enable expansion in profitable new territories and non-traditional locations. While the channel is universally acknowledged as best for both member acquisition and sales, the economics must change in order for this way of member-centric financial services to thrive and realize its potential in the new, consumer-driven, omnichannel environment. For more info: www.nafcu.org/ncr
Exploring Abhay Bhutada’s Views After Poonawalla Fincorp’s Collaboration With...beulahfernandes8
The financial landscape in India has witnessed a significant development with the recent collaboration between Poonawalla Fincorp and IndusInd Bank.
The launch of the co-branded credit card, the IndusInd Bank Poonawalla Fincorp eLITE RuPay Platinum Credit Card, marks a major milestone for both entities.
This strategic move aims to redefine and elevate the banking experience for customers.
What website can I sell pi coins securely.DOT TECH
Currently there are no website or exchange that allow buying or selling of pi coins..
But you can still easily sell pi coins, by reselling it to exchanges/crypto whales interested in holding thousands of pi coins before the mainnet launch.
Who is a pi merchant?
A pi merchant is someone who buys pi coins from miners and resell to these crypto whales and holders of pi..
This is because pi network is not doing any pre-sale. The only way exchanges can get pi is by buying from miners and pi merchants stands in between the miners and the exchanges.
How can I sell my pi coins?
Selling pi coins is really easy, but first you need to migrate to mainnet wallet before you can do that. I will leave the telegram contact of my personal pi merchant to trade with.
Tele-gram.
@Pi_vendor_247
The Evolution of Non-Banking Financial Companies (NBFCs) in India: Challenges...beulahfernandes8
Role in Financial System
NBFCs are critical in bridging the financial inclusion gap.
They provide specialized financial services that cater to segments often neglected by traditional banks.
Economic Impact
NBFCs contribute significantly to India's GDP.
They support sectors like micro, small, and medium enterprises (MSMEs), housing finance, and personal loans.
how to sell pi coins on Bitmart crypto exchangeDOT TECH
Yes. Pi network coins can be exchanged but not on bitmart exchange. Because pi network is still in the enclosed mainnet. The only way pioneers are able to trade pi coins is by reselling the pi coins to pi verified merchants.
A verified merchant is someone who buys pi network coins and resell it to exchanges looking forward to hold till mainnet launch.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
what is the future of Pi Network currency.DOT TECH
The future of the Pi cryptocurrency is uncertain, and its success will depend on several factors. Pi is a relatively new cryptocurrency that aims to be user-friendly and accessible to a wide audience. Here are a few key considerations for its future:
Message: @Pi_vendor_247 on telegram if u want to sell PI COINS.
1. Mainnet Launch: As of my last knowledge update in January 2022, Pi was still in the testnet phase. Its success will depend on a successful transition to a mainnet, where actual transactions can take place.
2. User Adoption: Pi's success will be closely tied to user adoption. The more users who join the network and actively participate, the stronger the ecosystem can become.
3. Utility and Use Cases: For a cryptocurrency to thrive, it must offer utility and practical use cases. The Pi team has talked about various applications, including peer-to-peer transactions, smart contracts, and more. The development and implementation of these features will be essential.
4. Regulatory Environment: The regulatory environment for cryptocurrencies is evolving globally. How Pi navigates and complies with regulations in various jurisdictions will significantly impact its future.
5. Technology Development: The Pi network must continue to develop and improve its technology, security, and scalability to compete with established cryptocurrencies.
6. Community Engagement: The Pi community plays a critical role in its future. Engaged users can help build trust and grow the network.
7. Monetization and Sustainability: The Pi team's monetization strategy, such as fees, partnerships, or other revenue sources, will affect its long-term sustainability.
It's essential to approach Pi or any new cryptocurrency with caution and conduct due diligence. Cryptocurrency investments involve risks, and potential rewards can be uncertain. The success and future of Pi will depend on the collective efforts of its team, community, and the broader cryptocurrency market dynamics. It's advisable to stay updated on Pi's development and follow any updates from the official Pi Network website or announcements from the team.
where can I find a legit pi merchant onlineDOT TECH
Yes. This is very easy what you need is a recommendation from someone who has successfully traded pi coins before with a merchant.
Who is a pi merchant?
A pi merchant is someone who buys pi network coins and resell them to Investors looking forward to hold thousands of pi coins before the open mainnet.
I will leave the telegram contact of my personal pi merchant to trade with
@Pi_vendor_247
How to get verified on Coinbase Account?_.docxBuy bitget
t's important to note that buying verified Coinbase accounts is not recommended and may violate Coinbase's terms of service. Instead of searching to "buy verified Coinbase accounts," follow the proper steps to verify your own account to ensure compliance and security.
what is the best method to sell pi coins in 2024DOT TECH
The best way to sell your pi coins safely is trading with an exchange..but since pi is not launched in any exchange, and second option is through a VERIFIED pi merchant.
Who is a pi merchant?
A pi merchant is someone who buys pi coins from miners and pioneers and resell them to Investors looking forward to hold massive amounts before mainnet launch in 2026.
I will leave the telegram contact of my personal pi merchant to trade pi coins with.
@Pi_vendor_247
how to sell pi coins at high rate quickly.DOT TECH
Where can I sell my pi coins at a high rate.
Pi is not launched yet on any exchange. But one can easily sell his or her pi coins to investors who want to hold pi till mainnet launch.
This means crypto whales want to hold pi. And you can get a good rate for selling pi to them. I will leave the telegram contact of my personal pi vendor below.
A vendor is someone who buys from a miner and resell it to a holder or crypto whale.
Here is the telegram contact of my vendor:
@Pi_vendor_247
Poonawalla Fincorp and IndusInd Bank Introduce New Co-Branded Credit Cardnickysharmasucks
The unveiling of the IndusInd Bank Poonawalla Fincorp eLITE RuPay Platinum Credit Card marks a notable milestone in the Indian financial landscape, showcasing a successful partnership between two leading institutions, Poonawalla Fincorp and IndusInd Bank. This co-branded credit card not only offers users a plethora of benefits but also reflects a commitment to innovation and adaptation. With a focus on providing value-driven and customer-centric solutions, this launch represents more than just a new product—it signifies a step towards redefining the banking experience for millions. Promising convenience, rewards, and a touch of luxury in everyday financial transactions, this collaboration aims to cater to the evolving needs of customers and set new standards in the industry.
how to swap pi coins to foreign currency withdrawable.DOT TECH
As of my last update, Pi is still in the testing phase and is not tradable on any exchanges.
However, Pi Network has announced plans to launch its Testnet and Mainnet in the future, which may include listing Pi on exchanges.
The current method for selling pi coins involves exchanging them with a pi vendor who purchases pi coins for investment reasons.
If you want to sell your pi coins, reach out to a pi vendor and sell them to anyone looking to sell pi coins from any country around the globe.
Below is the contact information for my personal pi vendor.
Telegram: @Pi_vendor_247
The secret way to sell pi coins effortlessly.DOT TECH
Well as we all know pi isn't launched yet. But you can still sell your pi coins effortlessly because some whales in China are interested in holding massive pi coins. And they are willing to pay good money for it. If you are interested in selling I will leave a contact for you. Just telegram this number below. I sold about 3000 pi coins to him and he paid me immediately.
Telegram: @Pi_vendor_247
Even tho Pi network is not listed on any exchange yet.
Buying/Selling or investing in pi network coins is highly possible through the help of vendors. You can buy from vendors[ buy directly from the pi network miners and resell it]. I will leave the telegram contact of my personal vendor.
@Pi_vendor_247
Investment Insights from NIFCU$: Standard & Poor's Downgrades U.S. Government: So What Now?
1. INVESTMENT INSIGHTS AUGUST 8, 2011
Standard & Poor's Downgrades U.S. Government: increasing downgrade and/or default risk, driving yields
So What Now? lower. The cut in credit rating by one notch to AA+ was
forewarned by S&P as far back as April. The three main
One of the three primary U.S. credit rating agencies, credit agencies, including Moody's Investor Service and
Standard & Poor’s (S&P), has downgraded their U.S. Fitch, had warned during the budget debate that if
Government long-term AAA debt rating to AA+ for the Congress did not cut spending by as much as $4 trillion
first time since granting it in 1917. There was no change over 10 years, the country faced a risk of downgrade.
to the short-term debt rating of A-1+. While forewarned, Fitch and Moody's have recently reaffirmed the long-
it still seems to have taken investors by surprise. The term AAA/Aaa credit rating of the U.S. government long-
consequences of S&P's U.S. Government downgrade term debt, even if qualified with a negative outlook. We
will likely have a greater emotional impact on investor do not anticipate further ratings action until at least
sentiment, exacerbated by the European chaos, than October 1st, when the FY2012 budget is due, although
any impact on the economy or fixed income liquidity. most are focused on the plan deadline for Deficit
Historically, sovereign downgrades were rooted primarily Reduction Commission.
in economic issues, without the political factors and
increasing legislative dysfunction currently cited by S&P. Capital Market Reaction
Historical Context of S&P’s Decision Intuitively, investor reaction should negatively impact
Treasuries prices more than equities, but equity
Credit downgrades are part of managing fixed income investors have suffered more than bond investors since
strategies. When a debt rating is lowered from AAA by June, from the heightened risk of U.S. Government
one notch, the resulting price adjustment is usually downgrade and/or default. If Treasury yields do not rise
modest, but issuers can expect to pay a slightly higher materially, in excess of 0.5-1.0%, it makes little sense for
yield, reflecting a higher risk premium. Thus, a one notch equities to be adversely impacted---10-year Treasury
sovereign downgrade from AAA generally has had yields have actually fallen 0.65% since June 30th. There
limited adverse effect on either fixed income or equity is indeed heightened investor nervousness and
markets beyond a day or two. S&P calculates the 1945- increasing risk aversion, given recent Eurozone policy
2010 average yield differential of 5-30 year maturities uncertainty that has tended to accentuate any global
between one notch corporate credit rating differences to equity volatility. While S&P’s downgrade may exacerbate
be less than 0.25%, ranging from 10-40 basis points, investor risk aversion, we don’t expect the fallout to
depending on prevailing credit spreads at the time. linger very long, as the actual economic implications
become well understood. We do not expect reduced
Even if the U.S. Government is eventually downgraded liquidity for any fixed income securities, including
by two or more credit rating agencies, we would expect Treasuries, debt of related government agencies, and
the rise in the annualized cost of capital to be less than municipalities that receive federal funds.
0.25%. Instead, the downgrade is likely to have greater
impact on political and legislative policy decisions, such The reasons cited by S&P for the downgrade hinged on
as imposing stricter fiscal discipline, beyond the deficit several factors that the credit rating agency was unable
reduction goal of $2.1 trillion recently agreed upon, or to overcome. John Chambers, Chair of S&P’s Rating
even enacting a constitutional balanced budget Committee, criticized the large and increasing debt
amendment. At a time when we observe the thought- burden from unsustainable spending, now in excess of
provoking and wrenching social unrest across Europe 25% of GDP, as well as a lack of "effectiveness, stability,
due to difficult government austerity decisions necessary and predictability" of U.S. [political] policy-making at a
to restore fiscal stability in Europe, moving toward critical time when fiscal challenges are increasing. In
balancing the U.S. Government’s budget has never been other words, S&P believes that the political environment
so likely to become politically correct. has increased the difficulty of addressing our high debt
level and expected fiscal deficits. Controversy over
The S&P downgrade came less than a week after raising the debt ceiling, distinct and independent of the
Congress agreed to spending cuts that would reduce budgeting process, has increased policy uncertainty and
debt versus the projected baseline by more than $2 the likelihood of default. Fundamentally, there is no
trillion—equities have been particularly volatile in recent option for a democracy but to expose the angst of
weeks, while Treasuries have rallied in spite of legislative policy decisions. Greater predictability of a
1
2. European Parliamentary government may seem
preferable, according to S&P’s logic, but countries such The U.S. Government has the flexibility to improve the
as Greece, Ireland, Spain, Italy, France, and the U.K. current fiscal situation, but the risk of default increases, if
are generally in worse condition and have been left with future debt ceiling increases continue to be politicized.
few and unpalatable options to reduce fiscal deficits,
including sale of national assets, privatization of What Can We Do to Reduce the Fiscal Deficit?
services, and deep across-the-board entitlement cuts.
1. Link Future Debt Ceiling Increases To Fiscal
There is also debate about whether S&P’s analysis may Budget Authorization---A key issue cited by S&P is
have exaggerated the expected U.S. fiscal deficit over the increased political uncertainty of tying previously
the next 10 years. Mr. Chambers cites a need to turn routine debt ceiling increases to agreement on
back entitlement growth, while providing sustainable fiscally responsible spending cuts. Most other
growth in economic activity. In observing struggling countries do not have a separate legislated debt
Eurozone countries attempting to turn around their fiscal ceiling. Never before has our fiscal deficit spiraled
deficits, our expectation is that this downgrade can out of control so quickly as to require multiple
provide further political impetus to meaningfully reverse significant increases in the debt ceiling over such a
the course of our own increasing fiscal deficit. short period. Procedurally linking budget legislation
to customary debt ceiling increases would likely
Comparison of U.S. Fiscal Budget Projections reduce the implicit risk of a U.S Government default,
which so concerned S&P.
S&P has taken this action despite their current fiscal
budget projection that the U.S. will remain within the 2. Receive an Demonstrably Effective Plan from the
range of Debt/GDP ratios of AAA rated countries. Congressional Commission on Deficit Reduction
Increasing U.K. Debt/GDP is expected to exceed 80%,
which is greater than the 74% U.S. Debt/GDP level 3. Balanced Budget Amendment---A constitutional
expected in 2011, and up from less than 60% recently. balanced budget amendment would preclude the
By 2015, S&P forecasts U.S. Debt/GDP to rise to 79%, need to increase the debt ceiling, except under
which would still be less than France’s expected extreme circumstances of war or unexpected crisis.
increase to 83%. If S&P believes that the United States
should be downgraded, the United Kingdom and France 4. Reduce Treasury Debt---The Federal Reserve
must also be at risk, but there is no indication of similar holds assets totaling more than $3 trillion, including
concern. Nor does it seem appropriate that U.S. $1.6 trillion in Treasuries. More than half of bonds
Government debt should be rated on par with other AA held are a liability the U.S. government owes to
rated countries like Belgium, Japan, Italy, Spain, Qatar, itself. Thus, the balance sheet can be reduced by
and Slovenia. Thus, political predictability was materially refunding Treasuries and selling previously-
significant in S&P’s decision. distressed securities. An easily achieved 50%
reduction in the balance sheet would increase debt
Investors restricted to investing in only AAA securities capacity by $1.5 trillion. Increasing headroom on the
should still be able to continue owning Treasury bonds, debt ceiling is desirable right now, and would nearly
as Fitch and Moody’s recently re-affirmed their top-tier eliminate default risk until 2014, at least.
rankings of U.S. long-term debt. We do not expect S&P’s
downgrade will have much impact on interest rates or 5. Federal Reserve Stops Paying/Lowers Interest of
the sale of Treasuries to finance US borrowing, 0.25% on Bank Reserves---Deposits would seek
particularly if both Moody’s and Fitch continue to out higher rates of return, likely increasing bank
maintain their current top-tier ratings. We also don’t lending. Calls for additional quantitative easing are
believe that S&P’s decision alone will have any impact misguided, in our opinion, and would be ineffective
on the haircut or concession associated with government with 10-year Treasury yields approaching 2.5%.
securities posted as collateral. A joint statement issued
last Friday evening (8/5) from the Federal Reserve, 6. Seek Areas of Agreement to Bolster Growth and
Federal Deposit Insurance Corporation (FDIC), National Investment---We believe U.S. economic growth
Credit Union Administration and Office of the would benefit from approving pending trade
Comptroller of the Currency noted that: agreements and permanently reducing the 35% tax
on repatriated earnings, which has historically
“For risk-based capital purposes, the risk weights for increased inflow of foreign earnings, now estimated
Treasury securities and other securities issued or to exceed $1 trillion offshore. While many countries
guaranteed by the U.S. government, government agencies, in recent years cut corporate tax rates, the U.S.
and government-sponsored entities will not change. The continues to have the second highest combined1
treatment of Treasury securities and other securities issued
or guaranteed by the U.S. government, government
corporate tax rate in the OECD of 38.2%, surpassed
agencies, and government-sponsored entities under other only by Japan at 39.5%, offering no incentive to
federal banking agency regulations, including, for example, bring profits home and re-invest. Lowering the
the Federal Reserve Board’s Regulation W, will also be
unaffected.” 1
Varies by location, but includes federal, state and local taxes
2