Egan Jones Downgrades US From AA To AA-

Tyler Durden's picture

From Egan Jones, who downgraded the US for the first time ever last July, two weeks ahead of S&P:

Synopsis: UNITED STATES (GOVT OF) EJR Sen Rating(Curr/Prj) AA-/ N/A Rating Analysis - 9/14/12 EJR CP Rating: A1+ Debt: $15.2B EJR's 1 yr. Default Probability: 1.2%


Up, up, and away - the FED's QE3 will stoke the stock market and commodity prices, but in our opinion will hurt the US economy and, by extension, credit quality. Issuing additional currency and depressing interest rates via the purchasing of MBS does little to raise the real GDP of the US, but does reduce the value of the dollar (because of the increase in money supply), and in turn increase the cost of commodities (see the recent rise in the prices of energy, gold, and other commodities). The increased cost of commodities will pressure profitability of businesses, and increase the costs of consumers thereby reducing consumer purchasing power. Hence, in our opinion QE3 will be detrimental to credit quality for the US.


Some market observers contend that a country issuing debt in its own currency can never default since it can simply print additional currency. However, per Reinhart & Rogoff's " This Time Is Different: Eight Centuries of Financial Folly " , p.111, 70 out of 320 defaults since 1800 have been on domestic (i.e., local currency) public debt. Note, US funding costs are likely to slowly rise as the global economy recovers or the FED scales back its Treas. purchases (75% recently).


From 2006 to present, the US's debt to GDP rose from 66% to 104% and will probably rise to 110% a year from today under current circumstances; the annual budget deficit is 8%. In comparison, Spain has a debt to GDP of 68.5% and an annual budget deficit of 8.5%. We are therefore downgrading the US country rating from "AA" to "AA-".


Ratings History:
Egan-Jones rating history for United States (Govt of).
9.14.12  AA to AA (-)
4.15.12  AA+ to AA (Negative outlook) 
7.16.11  AAA to AA+ 

Full report

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HelluvaEngineer's picture

I bet the Silver Bears video set them off.

LawsofPhysics's picture

Paging the bond vigilantes, where the fuck are you guys?

MachoMan's picture

Busy squeeling like pigs listening to ben play the banjo

Bay of Pigs's picture


The bond vigilantes left years ago...

Schmuck Raker's picture

LOL - Silly LoPhys, bond vigilantes are the "smart money", they don't own US sovereign debt.

malikai's picture

At some point, "don't fight the fed" will become "get the fuck out of dodge".

Rylie's picture

I got that silver coin

Vincent Vega's picture

Long bond off 3 points....some vigilanties out there. It will be interesting to see what next week brings.

viahj's picture

China is weighing it's options on it's USD holdings.

odatruf's picture

Ironic that someday we'll be grateful to the bastards for the day they came in to wreck the day and saved it, isn't it?

FischerBlack's picture

We might get a red close today. That would be weird and stuff.

Threeggg's picture

How can we close red when they have a printing press and a face-cord stacked at every trading console ?

We will never close RED again !

QE4ever !!

LULZBank's picture


Daddy will be so unhappy?

Vincent Vega's picture

Sean is gonna keep fucking around with these ratings and accidentally shoot himself in the back of the head 3 or 4 times.

LMAOLORI's picture



OMG good one some of you really crack me up that's why I use ROFLMAO

Tijuana Donkey Show's picture

Heart attack! He didn't believe in Obamacare, and looked what happened, BAM, heart attack. 

Aquiloaster's picture

Inflation everywhere--including grade inflation.

LouisDega's picture

Egan Lou Who. Thats Who

Yen Cross's picture

 Sweet!   ( A SMALL NOT SO - OBSCURE- RATINGS AGENCY) Sets' precedent!

Fecklesslackey's picture

Who cares ... market (SP) +5

HelluvaEngineer's picture

Don't spoil the coke & underage hookers party in the Hamptons

Fecklesslackey's picture

I didn't know Egan Jones was in that business. But independent hooker rating service might gain some traction

ar01's picture

Surely the SEC can find more paperwork to file charges against them, right?

dwdollar's picture

Where is Egan Jones located? The Navy needs to send some ships there.

jerry_theking_lawler's picture

the Us Navy or Russian....better not ask a democrat....

Banksters's picture

The us has infinity money, greenspit said so. Too bad the unfed has the gold.

youngman's picture

He nails it in one paragraph....

LULZBank's picture

Marc Faber did it in one line...

disabledvet's picture

I do it in one word: "hahahahahaha." what else can I do? "we're all stand up comedians now." oh, look! an idiot paying his bills! did you hear the one about the bank robber? When the teller pulled out the gun and handed him the note "your money or your life" he said "I have to think about that now."

Sphinx_www's picture

Egan is a leading indicator. It wont be a decade before the rest catch up.

alfred b.'s picture


    ....wonder if moody's and/or s&p will "keep up with the Jones's"


ziggy59's picture

On a long enough timeline the credit of the U.S. goes to F

Jlmadyson's picture

Timmy G: "No risk of credit rating downgrade."

How about the risk after a couple of downgrades Timmy?

Timmy G gonna get ya.

uno's picture

music to bernake, wants US dollar down fast

pendragon's picture

bitch slap from the regulators in 5,4,3,2,1.....

Mr Lennon Hendrix's picture

Although US debt should be considered junk, I will say downgrading them because the Fed prints is not logical.  The Fed is a private for profit bank that has no government ties to the US.

Now downgrading the Fed, that would be something!

giovanni_f's picture

Why not taking the direttissima from AA -> DDD?

ziggy59's picture

Why not? Because we're not batteries or tits.

Ying-Yang's picture

Now eliminating the Fed, that would be something!

fixed it for ya

q99x2's picture

Arrest Bernanke for financial terrorism.

lolmao500's picture

Time for SP, Moody and Fitch to man up and do it too.

Dr. Engali's picture

Yeah right. The U.S wll go down like AIG.....AAA rated.

WhiteNight123129's picture

THis ~I am completly nuts~ strategy is to force GOOG AAPL MSFT ORCL to spend the 1.6% of GDP they hoard in cash and waste it, Corporate Keynesianism.

monopoly's picture

Wow, they got a pair, don't they. Where is this honesty coming from. Not used to it.