USA loses AAA credit rating as S&P downgrades due to runaway debt and government spending

Saturday, August 06, 2011 by Mike Adams, the Health Ranger Editor of NaturalNews.com (See all articles...) Tags: Standard & Poor, debt rating, health news

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(NaturalNews) The USA lost its long-coveted AAA debt rating late Friday as Standard & Poor's downgraded the nation's debt to AA+, citing out-of-control government spending and record budget deficits. This is something that key members of the Obama administration promised would never happen (http://thehill.com/blogs/on-the-money/budget...).

They were wrong, of course; just like the entire cabal of useless bureaucrats in Washington is wrong about what's going to happen next. This downgrade of the debt rating by S&P, you see, is what NaturalNews and other alternative media leaders have been predicting and warning about for years. The U.S. government's runaway debt spending, we warned, was entirely unsustainable. The risk of default is not merely high, but it's actually so high that if S&P had any honesty, it would have downgraded U.S. debt to junk status years ago. (The fact that it's still at AA+ is a mathematical joke.)

The flight away from US debt

Why does this debt rating matter? Consider, for starters, why S&P waited until after the markets closed on a Friday to even make its announcement. This gives Washington the weekend to try to figure out some kind of rescue plan before Monday morning when institutional investors around the world will begin what can only be called the mass flight away from U.S. debt. The great selloff will begin in earnest, and this will flood the open markets with toxic US debt that no one in their right mind would dare purchase.

Institutional investors, you see, are frequently bound by rules that require them to invest solely in AAA-rated debt sources. With S&P's downgrade of U.S. Treasury debt, these institutions (which include some of the largest investment funds in the world) must, by their own rules, sell off 100% of their US debt holdings. This will all be happening at virtually the same time when the week opens on Monday.

The impact of all this is that the US will need to pay higher interest rates to issue new debt. It will be more expensive, in other words, for the US to find buyers of its debt, and this will be very quickly reflected in the compounding debt burden tacked on the total national debt, which is currently at $14.5 trillion and counting (http://www.usdebtclock.org).

Since every administration in the White House absolutely refuses to cut government spending -- and the Obama administration wants to INCREASE it! -- the government is forced to keep issuing more debt at higher interest rates.

This brings me to the rule of 72.

Compounding debt interest adds up quickly

The rule of 72 provides a simple way to calculate how long it takes for money to double when subjected to compounding interest. Simply take 72 divided by the annual interest rate, and that tells you the number of years necessary for the money (or in this case, the debt) to double.

For example, if you loan me $10,000 and you charge a 7% interest rate, then using the rule of 72, I know that in roughly ten years, I will owe you double what you loaned me, or $20,000.

If you loan me $10,000 and you charge me a 10% interest rate, then I know I'll owe you $20,000 in 7 years.

At a 12% interest rate, compounding debt doubles every six years.

As compounding interest rates rise, the acceleration of the total debt owes grows very rapidly. So even a tiny increase in the interest rate on debt will result in a compounding accelerated growth in the total debt burden. With S&P downgrading the US debt rating to AA+, the interest rate the US Treasury will now be forced to pay on the debt will be higher than it was before, and this means we are now facing an accelerated financial blowout schedule.

A nation brought to its knees by government crooks and tyrants

The financial demise of the US government, in other words, is now significantly closer than it was two days ago. The fiscally corrupt American empire cannot survive without its false AAA debt rating. That's why this debt downgrade will accelerate the total debt default we've been warning about for years.

The US government today, of course, is run by liars and thieves, crooks and thugs. Virtually every word uttered by the White House Press Secretary is a complete fabrication. Everything you're being told from official sources about the US debt is a bald-faced lie. The US debt is a giant Ponzi scheme that's about to come tumbling down in a complete financial wreck. We warned you this was coming, even as internet trolls claimed it was impossible for the US to default on its debt. Impossible? Then why did it nearly happen just last week?

People like Gerald Celente and Paul Craig Roberts have been right about the coming debt implosion, which is why the mainstream media largely refuses to talk to them. Only the alternative media has the guts to report the truth about the impending financial collapse the US government now unquestionably faces.

Even the US Postal Service has financially collapsed and has just announced it is in default (http://news.yahoo.com/us-postal-warns-could-...).

Do we even have two years remaining?

S&P says it will revisit the US debt situation in two more years and possibly downgrade the debt rating to AA at that time (http://www.bloomberg.com/news/2011-08-06/u-s...). Two years? Are you kidding? I'm not even sure the US government as we know it today will exist at all in two years. And even if it does, things can only get worse because the runaway debt spending will never be halted. Washington is in a spending blowout phase that looks a whole lot like the waning days of the Roman Empire as it tried to service its military imperialism even while its own politicians at home had all become deeply invested in corruption.

As the US spirals into a total financial collapse, you can expect a rise of the police state just as we're seeing right now with the Rawesome Foods raid (https://www.naturalnews.com/033220_Rawesome_F...). As any empire begins to collapse, it pulls out the guns to try to keep its citizens in line. Free Speech is stripped away from citizens (https://www.naturalnews.com/033244_Rawesome_F...) and law is abandoned in favor of total government tyranny against the People.

That's precisely what we're seeing in America today, with the ATF's illegal gun running (https://www.naturalnews.com/032934_ATF_illega...), the FDA's illegal raids on vitamin manufacturers, the USDA's total betrayal of public health as it conspires with GMO companies to unleash massive genetic contamination across our planet, and so on. We are watching the last desperate gasps of a dying corrupt empire -- an empire that can no longer survive by telling the truth so has turned instead to insidious lies and a total assault on freedom.

History will call this time "the beginning of the collapse of the American empire." You are living it, folks. It's a fascinating time to be alive. Just try not to get crushed when this once-great empire comes crumbling down all around you. Very few people are prepared for what's coming. Perhaps 99% of the American people are completely and utterly clueless about all this. They will not be happy when they wake up one day and find out the dollar has been devalued, abandoned or massively hyper-inflated. That's the day you don't want to find yourself thinking "Gee, maybe I should have gotten prepared a little sooner..."

My financial preparedness course published in March of this year warned about all this, by the way, and it provides numerous valuable solutions for protecting yourself from the coming debt collapse. Check it out at: http://premium.naturalnews.tv/Be_Prepared_No...

People who have already learned this information are ahead of the game and will be far better prepared for the massive financial collapse that's coming. Only people living in total denial can't see what's becoming obvious now: The financial end of America approaches.