AAA Rating

We have spoken of, and blogged about the U.S. losing it's AAA credit rating. The headlines today confirm this is a looming possibility.
U.S. likely to lose AAA rating: Prechter

Technical analyst Robert Prechter on Monday said he sees the United States losing its top AAA credit rating by the end of 2010, as he stuck by a deeply bearish outlook on the U.S. economy and stock market.

Read full article here; http://www.reuters.com/article/newsOne/idUSTRE55E6BM20090615

For those readers who may be saying, "So what does that mean?", I have a fairly easy answer; Pretend your neighbor came to you and needed to borrow $10,000. You had borrowed money to him before and he had always paid you 5% interest and had always paid you back on time. So at the end of the year, you expect him to pay you back $10,500. Your neighbor is the President of some large company and has always had a great income and never had a financial issue in his life.
That neighbor has a AAA credit rating in your book.

Now let's pretend that he shows up today and needs another $10,000 for another project but the facts have recently changed. You had recently read in the local newspaper that his home was being foreclosed on. You had also heard him involved in loud shouting matches with his wife. And to top it all off, your cousin works for the guys business and he has told you that they are laying off because business is really slow. Would you still borrow the money to your neighbor...and if so, would you still only expect 5% interest when you know dang well that the loan you make is going to be 3-4 times more risky?? Maybe you would tell your neighbor that you will loan him the money but he will need to pay you back $12,000 at year end.

Now carry that forward to the U.S. government. What rate of interest will other countries of the world demand if we ask for more loans? Now apply that to $10 Trillion of current debt and you will understand that even if we raised the personal income tax bracket to 100%....we won't have enough money to pay back the principle and interest.

So where do we put our treasure.....???....where moth and rust will not destroy.