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S&P At It Again – Cuts Spain’s Rating

It appeared that the worst had already passed Spain and they were on their way to an economic recovery, but S&P doesn’t quite feel the same way – they cut their credit rating on Friday.

Their rationale was very similar to Moody’s, who also cut Spain’s rating recently – they have a very high level of unemployment, there is a lot of debt currently held by the private sector, and there is a shrinking amount of credit available.

Obviously, this did a little damage to the value of the Euro, but it pretty much bounced back by the end of the trading session as investors were seemingly unfazed by this news. When Moody’s cut the rating last week, most investors were pretty confident that this would be coming.

The main problem that Spain has to deal with is its lack of economic growth and a very high level of unemployment. Currently, their economy is stagnant and they have a 21% unemployment rate – 1 in 5 people don’t have a job. Until they get those two problems under control, things may just continue to get worse. When people aren’t working and the economy is not growing, bad things happen  – especially when the world economy is in the position it is currently in.


US Deficit Huge In 2011, Grew Over 2010

Data recently released showed that during the 2011 fiscal year, which ended a little while ago, the US deficit actually widened a little, and was around $1.3 trillion dollars in total. This is the third time in as many years that it was over $1 trillion dollars.

This information really isn’t news to anyone – we all knew the very poor financial shape that the US was in. But, it just sets a benchmark so we can see what progress has been made when next years numbers are reported.

There have been many plans when it comes to fixing this problem, from spending cuts to Obamas failed $447 billion jobs plan, but nothing has seemed to work. The US Deficit Super committee has been tasked with making over $1 trillion dollars worth of cuts over the next 10 years, but we will have to wait until November 23rd to see the results of that meeting.

One good piece of news, though, the ratio of the deficit to the GDP of the US fell to 8.7% from 9% for last year. This doesn’t mean much when you look at the issue as a whole, but it is still a little reason for optimism.

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