EconomicCrisis.US

It finally happened. Last week, one of the big bond rating agencies, Standard and Poor’s, put a “negative” watch on U.S. government debt. This is the first time the good old US of A isn’t AAA-rated with a “stable” outlook.

How long can we spend $1.40 for every $1 we bring in? According to S&P, the chickens will come home to roost as early as 2013 if Washington doesn’t start getting our nation’s finances in order.

The credit watchdogs are rightfully worried the right and the left won’t come to an agreement to reduce deficits until it’s too late, resulting in a possible downgrade of our actual bond rating, from AAA to AA, and not just a downgrade in the “outlook.”
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Around the world, investors are breathing a sigh of relief as the surprise financial crisis in Dubai starts looking more and more like a regional, not global, contagion. But the crisis has shined a spotlight on the dangers of overleveraged governments – and every American should be paying attention.

In many ways, Dubai is a special case. It’s a glitzy city-state controlled by a sheikh, populated mostly by migrant workers at every level of the economic spectrum. It’s had a reputation as the Vegas of the Middle East – and its flashy, fast-rising hotels, shady forms of financing and (comparatively) lax social standards seemed to fit the bill.
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The global economic crisis may be driving more people into forced labor and other forms of modern-day slavery, a senior U.S. official said Friday.

Harder economic conditions have had a “driving effect” as labor recruiters exploit the poor with false promises of better jobs, said Luis CdeBaca, the U.S. ambassador for human trafficking issues.

Migrants are taking more risks and are willing to pay recruiters more and travel farther distances because of “increased desperation after the crash,” he said.

Victims are often promised higher-paying jobs, only to find themselves deep in debt and virtual slaves working for little money in jobs such as domestic helpers or prostitutes.
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The United States government is financing its more than trillion-dollar-a-year borrowing with i.o.u.’s on terms that seem too good to be true.

But that happy situation, aided by ultralow interest rates, may not last much longer.

Treasury officials now face a trifecta of headaches: a mountain of new debt, a balloon of short-term borrowings that come due in the months ahead, and interest rates that are sure to climb back to normal as soon as the Federal Reserve decides that the emergency has passed.

Even as Treasury officials are racing to lock in today’s low rates by exchanging short-term borrowings for long-term bonds, the government faces a payment shock similar to those that sent legions of overstretched homeowners into default on their mortgages.
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