Sean Egan: Solving Fiscal Cliff Wouldn’t Help US Credit Rating

Wednesday, 07 Nov 2012 09:36 AM

By Dan Weil

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink
A Congress-White House compromise to avoid the fiscal cliff wouldn’t be enough to improve the blighted credit rating of the U.S. government, says Sean Egan, managing director of Egan-Jones, which has slashed the rating twice this year.

"The key measure on sovereign credit quality is debt-to-[gross domestic product]. In the case of the U.S., it’s risen rather dramatically, from four years ago at 75 percent debt-to-GDP, to currently over 104 percent,” Egan tells CNBC.

Debt totals more than $16 trillion, while GDP totals more than $15 trillion. Economic growth registered 2 percent in the third quarter, and many experts anticipate a lower figure for this quarter.

Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown

“The problem in the U.S. is that the debt has grown, whereas the GDP has not grown,” Egan says. While “the U.S. has had the benefit of being the major reserve currency, that only takes it so far.”

Egan-Jones latest U.S. rating cut came in September, reflecting concern about the Federal Reserve’s quantitative easing program. The firm has an AA-minus rating for the United States, lowest of the four major rating agencies.

The same factors leading to the debt downgrades should give investors pause too, says Pimco managing director Bill Gross.

“[P]ortfolio strategies should acknowledge bite-sized future returns and the growing risk that the negative consequences of misguided monetary and fiscal policy might lead to disruptive financial markets at some future point,” he writes in his latest monthly commentary.

Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown

© 2014 Moneynews. All rights reserved.

Share:
  Comment  |
   Contact Us  |
  Print  
  Copy Shortlink
Around the Web
Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Country
Zip Code:
Privacy: We never share your email.
 
Hot Topics
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Around the Web
Top Stories
You May Also Like

Goldman's Blankfein: Fed 'Wise and Courageous' to Continue Stimulus

Monday, 20 Oct 2014 08:51 AM

Goldman Sachs CEO Lloyd Blankfein gives the Federal Reserve credit for ignoring critics who say the slow process to with . . .

El-Erian: 4 Things to Remember After a Wild Market Week

Monday, 20 Oct 2014 08:02 AM

Many investors will remember last week's market gyrations (and Wednesday's in particular) as exceptional, exciting, frig . . .

Another Year, Another Small Social Security Bump: $20 a Month

Monday, 20 Oct 2014 07:49 AM

For the third straight year, millions of Social Security recipients, disabled veterans and federal retirees can expect h . . .

Most Commented

Newsmax, Moneynews, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, NewsmaxWorld, NewsmaxHealth, are trademarks of Newsmax Media, Inc.

 
NEWSMAX.COM
America's News Page
©  Newsmax Media, Inc.
All Rights Reserved