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Understand why S& P would think to downgrade the US’s AAA credit rating.

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#1 Thu, Aug 11, 2011 - 5:54pm
reefman
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Understand why S& P would think to downgrade the US’s AAA credit rating.

I saw this posted on ZH. I am reposting it here. HT BoNeSxxx

This simplistic analogy makes it a little easier to understand why Standard & Poor’s would think to downgrade the US’s AAA credit rating.

U.S. income: $2,170,000,000,000

  • Federal budget: $3,820,000,000,000
  • New debt: $ 1,650,000,000,000
  • National debt: $14,271,000,000,000
  • Recent budget cut: $ 38,500,000,000 (about 1 percent of the budget)

Now think about these numbers in terms that we can relate to. Remove eight zeros from these numbers and pretend this is the household budget for the fictitious Jones family:

  • Total annual income for the Jones family: $21,700
  • Amount of money the Jones family spent: $38,200
  • Amount of new debt added to the credit card: $16,500
  • Outstanding balance on the credit card: $142,710

Amount cut from the budget: $385

Edited by: reefman on Nov 8, 2014 - 5:04am
Fri, Aug 12, 2011 - 7:23am
infinite_easing
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that's been a "known" all

that's been a "known" all along; the US is in a deep debt abyss. The S&P downgrade focused attention on the dysfunctional character of the US political system, namely the abject failure of the US Congress and the Obama Administration to exercise their responsibilities in a timely, effective and transparent way. The debt ceiling debate is the immediate cause of the erosion in confidence regarding US financial obligations, and its potential to actually arrive at a sustainable fiscal plan.

Fri, Aug 12, 2011 - 9:39am
lilbromarky1
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Joined: Jun 15, 2011
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reefman wrote: I saw this

reefman wrote:

I saw this posted on ZH. I am reposting it here. HT BoNeSxxx

This simplistic analogy makes it a little easier to understand why Standard & Poor’s would think to downgrade the US’s AAA credit rating.

U.S. income: $2,170,000,000,000

  • Federal budget: $3,820,000,000,000
  • New debt: $ 1,650,000,000,000
  • National debt: $14,271,000,000,000
  • Recent budget cut: $ 38,500,000,000 (about 1 percent of the budget)

Now think about these numbers in terms that we can relate to. Remove eight zeros from these numbers and pretend this is the household budget for the fictitious Jones family:

  • Total annual income for the Jones family: $21,700
  • Amount of money the Jones family spent: $38,200
  • Amount of new debt added to the credit card: $16,500
  • Outstanding balance on the credit card: $142,710

Amount cut from the budget: $385

Good analogy thank you

Like my ideas? Check our blog at: https://backtobasicseconomics.blogspot.com/

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