U.S. Credit: The Armageddon Scenario

Yesterday we posted about the USA losing it's triple AAA credit rating and the problems that could bring to an already shaky house of cards our financial system has become.

Today we find this article talking about the death spiral that can happen when TOO much money is borrowed and the interest rate becomes TOO high.

A credit rating downgrade for the United States would spell even more financial trouble for the U.S. government, hampering its ability to borrow money as investors demand higher yields to make up for the increased risk. That would cause its national debt to balloon further and increase the need to hike taxes or make even more painful cuts in spending.

But the real Armageddon scenario would occur when the impact of a sovereign downgrade hit the rest of the U.S. economy.

The U.S. “risks eroding its standing at the core of the global monetary system,” Mohamed El-Erian, chief executive and co-chief investment officer at PIMCO, wrote in a commentary piece for the Financial Times.

Pension funds and investment trusts that are bound by covenant to invest only in AAA-rated debt could be forced to dump U.S. holdings. Banks that do the bulk of their business in the U.S. could themselves face downgrades. Eventually, the dollar could lose its status as the world’s reserve currency.

The ripple effects of Standard & Poors’ decision to downgrade its outlook for the U.S. were already spreading on Monday.

See it here; http://www.washingtonpost.com/blogs/political-economy/post/us-credit-rating-downgrade-the-armageddon-scenario/2011/04/19/AFnE0n5D_blog.html

In hindsight this seems like such a simple quagmire to avoid.  QUIT BORROWING MONEY and this would have never happened.

But it seems as if a strange force takes over all of our elected politicians upon convening in Washington....they get subdued by the god of Mammon and start to believe all his lies, "You can have it now and pay for it later!  You deserve to have it now...the money will take care of itself!  You were elected to bring Federal money home to your state...now do your job!"

Let's remember what 1 John 5:19 says, "We know that we are children of God, and that the whole world is under the control of the evil one."

And yes, that does mean that the U.S. government, (which is part of the whole world) is under the control of the evil one....so it shouldn't surprise us that most of our politicians have believed the lies.