FedRes: Default Would Be Dangerous; Fitch May Cut Rating!

• QE3 will happen one way or another and whatever name they hide it under. The snakes are probably playing their Hegelian Dialectic game again: Problem, Reaction and Solution. They will allow the stock market and economy to collapse by ending QE2 (Problem). When the hue and cry (Reaction) come, they will present their Pre-Planned Solution (QE3) and appear as saviors! Of course, when hyperinflation kicks in, they will say they had no choice!
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  Fed: Default would be dangerous; Fitch may cut rating
  (Reuters) – A default would have severe reverberations in global markets, a top Federal Reserve official said just hours after Fitch Ratings warned it could slash credit ratings if the government misses bond payments.
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  St. Louis Federal Reserve Bank President James Bullard told Reuters on Wednesday “the U.S. fiscal situation, if not handled correctly, could turn into a global macro shock. “The idea that the U.S. could threaten to default is a dangerous one,” he said in an interview.
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  “The reverberations in those global markets would be very severe. That’s where the real risk comes in,” Bullard warned. Some Republican lawmakers have said a brief default, which would be inevitable in August if lawmakers fail to raise the nation’s $14.3 trillion debt ceiling, might be acceptable if it forces the White House to deal with large budget deficits.
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  Bullard’s warning came just after Fitch said it would slash to “junk” the ratings on all Treasury securities, seen worldwide as a risk-free investment, if the government misses debt payments by August 15. The ratings would go back up once the government fulfills its debt obligations, but probably not to the current AAA level, Fitch said, in a stark statement about the impact of even a short-lived default on the credit-worthiness.
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  “The notion of flirting with a default on existing obligations flirts with irresponsibility,” Richard Bernstein, chief executive of Richard Bernstein Capital Management LLC, said at the Reuters 2011 Investment Outlook Summit in New York. The White House said Fitch’s warning makes it clear that “there is no alternative to raising the debt ceiling.” “This is not about additional spending, this is about honoring the obligations the United States government has made,” White House press secretary Jay Carney told a daily briefing.
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  Moody’s and Standard and Poor’s have issued similar warnings. But Fitch was the first among the big-three rating agencies to say Treasury securities could be downgraded, even for a short period, to a non-investment grade. The agency said even a short-lived default, also called a technical default, “would suggest a crisis of governance from a sovereign credit and rating perspective.”
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  “Clearly the political signals which are coming (from Washington) are a source of concern,” David Riley, head of sovereign ratings at Fitch, told Reuters in an interview. He added, however, that the agency still believes lawmakers will eventually reach an agreement on the debt ceiling. “We know from previous experiences — both with the government shutdown and previous episodes with the debt ceiling — that although you get a lot of brinkmanship, ultimately it does get resolved,” Riley said.
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  … for the full article click here!

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