The show-stopping financial news in August was Standard & Poor's downgrade of the United States' credit rating from AAA to AA+.
What you may not have heard is what S&P did shortly thereafter, namely downgraded some 11,000 municipal issues:
"S&P said it had lowered to double-A-plus from triple-A the ratings on certain public finance debt issues linked to the federal government..."
Wall Street Journal, August 9
While 11,000 sounds like a lot, the article also says that's less than one percent of the $2.9 trillion municipal bond market. Still, we see how our debt problems can spread: a lack of confidence in one financial arena can move elsewhere with amazing speed.
And as a Sept. 21 Reuters story explains, a major rating agency has now downgraded the debt of three of the nation's largest banks.
"Moody's cut the debt ratings of Bank of America, Wells Fargo and Citigroup...saying the U.S. government is getting less comfortable with bailing out large troubled lenders.
"The government is 'more likely now than during the financial crisis to allow a large bank to fail should it become financially troubled,' the ratings agency said."
Moreover, the article adds that the long-term outlook on the three banks mentioned remains negative.
So what about the safety and stability of the banking system overall? The September Elliott Wave Theorist states:
"The specter of a banking panic has become far darker since the collateral for bank deposits—land and buildings—has fallen globally in value at the steepest rate since the Great Depression."
But won't the FDIC come to the rescue if banks fail?
"The money available through the FDIC...is enough to cover only a small fraction of U.S. bank deposits."
Conquer the Crash, 2nd edition (p. 254)
In the new Elliott Wave Theorist, you'll learn why the system has escaped a bank run so far (the reason is overlooked by most financial commentators), and why the "monetarist theory" is on the verge of a spectacular failure.
If a systemic bank run is ahead and you can't count on the FDIC, how do you protect your hard-earned nest egg?
Find out by reading the second edition of
Conquer the Crash. Very specific and useful
"nest-egg safety" information is presented in the volume's pages. We'd be delighted to send the book to you
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