"The Commerce Department government last Friday slashed its measure of gross domestic product growth for the first three months of 2011 by 1.5 per centage points to a mere 0.4 per cent annual rate."
3Q is going negative, too many headwinds. GDP needs to be above 3% to pay the bills. GDP is nowhere near 3%. Europe is bankrupt, debt downgrades will shock the system increasing systemic risk and causing investment to retrench. Every asset price needs to be reevaluated after US downgrade. Global debt reset will leave markets in shambles.
The longer US stays under 3% GDP, the faster US debt reaches 100% of GDP. As of right now, policies have the US on the path to more debt downgrades. The risk of 100% debt to GDP is rising fast and it might already be inevitable. How long can US go on with sub 2% GDP before ratings fall again? Emerging market yield curves are dipping.
S poors, says 2.5% GDP 1.5% inflation will cause another debt downgrade. What will negative GDP or another recession do to their forecast? 1q GDP was .4% and 2q GDP was 1% probably will be revised to negative to .75%. 3q is going negative. They are underestimating inflation due to price pressure from emerging markets. They are underestimating debt pressure from medicare social security demographics. Their case also assumes bush tax cuts go away which could hurt growth further. The shatt is hitting the fan, global reset is needed for a healthy future. This is a one way train with no brakes.