Both Moody’s and Standard & Poors are issuing yet another warning on the U.S. credit rating due to the current trend in the National Debt. Sarah Carlson of Moody’s said “We have become increasingly clear about the fact that if there are not offsetting measures to reverse the deterioration in negative fundamentals in the U.S., the likelihood of a negative outlook over the next two years will increase.” Last week, Federal Reserve Chairman Ben Bernanke warned that while the U.S. economy is slowly growing, high unemployment may remain a problem for the next 4 to 5 years. If these conditions were not bad enough, rising prices of essential commodities, like food and oil, are likely to pinch American pocket books even further.

Currently, the United States still enjoys a Triple-A rating on it’s Treasury bonds, but over the past two years, more and more warnings from credit agencies like S&P and Moody’s point to the debt crisis. The ratio of sovereign debt to GDP is inching further to the dangerous 90% mark. Other nations, like many in Europe, which have reached and exceeded this ratio have had their bond ratings reduced. This forces those countries to pay higher interest rates on their bonds and debts. Some analysts are now predicting that the debt-to-GDP ratio may reach 397% by 2020 due to increase costs of entitlement programs and interest payments servicing the National Debt.

In the past year, we have also seen food and oil prices soar. Many basic commodities like rice, corn and sugar have risen 30% or more. Oil is now pushing over $90 a barrel and is expected to hit $100 soon. Donald Trump appeared yesterday on Fox News Channel’s ‘Your World’ with host Neil Cavuto. Trump blamed the OPEC for the high cost of oil, telling Neil that economists he has talked to tell him that America can only prosper if oil is $40 a barrel or less. According to the Financial Times, Saudi Arabia, a leader in OPEC, is working to keep prices in the $70-80 a barrel range. But analysts warn that $100 a barrel can happen anytime now. The price of Brent oil from the North Sea of Europe hit $98.85 briefly.

Along with economic uncertainty in Europe, other nations are getting hit hard as well with the rising prices of food and oil. Tunisia has been having riots for a month now. Neighboring Algeria has also experienced growing unrest. Both North African countries face high unemployment and have seen food prices nearly double in recent months. The recipe of inflation and unemployment combined could become a new economic contagion.

The time for aggressive action in reducing spending and increasing employment growth is now. America cannot afford to continue down it’s current path of excessive budget deficits and regulations straggling business expansion. Standard & Poors and Moody’s both warn of reducing the U.S. credit rating, making it more difficult, and expensive, to borrow money and pay interest on the National Debt. Coupled with rising food and oil prices, as well as long-term unemployment, the economic picture remains bleak for the next two years, perhaps much longer.

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