Signs of the Times
As if the last week wasn't already packed with bad news, yesterday we got two more unprecedented signs of the economic times.
Late yesterday, Standard & Poor's dropped the credit rating for the United States of America for the first time since 1917. The "full faith and credit" of the U.S. Treasury is no longer the world's gold standard. Instead of the U.S.A. the AAA rating that had become synonymous with the dollar, is now in the possession of France. America is on a par with New Zealand and Belgium.
Also, The Bank of New York Mellon announced it will actually start charging customers for large cash deposits. Think about it! Instead of some meager amount of interest – or even zero – the bank is effectively saying they can't earn enough on those deposits to even cover their overhead.
And, the 2011 deficit is already at $1.103 trillion with two months to go in the fiscal year, "on pace for the second-largest shortfall in history."
Did you ever think you'd see it? I did not.
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Sanjai Bhagat is Professor of Finance at the University of Colorado at Boulder. He has worked previously at the U.S. Securities and Exchange Commission, Princeton University, and University of Chicago. He has an MBA from the University of Rochester and a Ph.D. from the University of Washington.