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U.S. to Get Downgraded Amid Fiscal ‘Theater,’ Pimco Says

Posted By yihan On October 18, 2012 @ 8:10 am In Money Watch | Comments Disabled

Tracy Withers
Bloomberg [1]
October 18, 2012

The sovereign credit rating of the U.S. will be cut as “fiscal theater” plays out in the world’s biggest economy, according to Pacific Investment Management Co., which runs the world’s largest bond fund.

“The U.S. will get downgraded, it’s a question of when,” Scott Mather [2], Pimco’s head of global portfolio management [3], said today in Wellington. “It depends on what the end of the year looks like, but it could be fairly soon after that.”

The Congressional Budget Office [4] has warned the U.S. economy [5] will fall into recession if $600 billion of government spending cuts and tax increases take place at the start of 2013. Financial markets are complacent about whether the White House and Congress will reach agreement on deferring the so-called fiscal drag on the economy until later next year, Mather said.

In a “base case” of President Barack Obama [6] being re- elected and Congress becoming more Republican, there is a high likelihood an agreement “doesn’t happen in a nice way, and we have disruption in the marketplace,” he said.

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URL to article: http://www.prisonplanet.com/u-s-to-get-downgraded-amid-fiscal-%e2%80%98theater%e2%80%99-pimco-says.html

URLs in this post:

[1] Bloomberg: http://www.bloomberg.com/news/2012-10-17/u-s-to-get-downgraded-amid-fiscal-theater-pimco-says.html

[2] Scott Mather: http://topics.bloomberg.com/scott-mather/

[3] portfolio management: http://topics.bloomberg.com/portfolio-management/

[4] Congressional Budget Office: http://topics.bloomberg.com/congressional-budget-office/

[5] U.S. economy: http://topics.bloomberg.com/u.s.-economy/

[6] Barack Obama: http://topics.bloomberg.com/barack-obama/

[7] Fiscal Cliff Deal: $1 In Spending Cuts For Every $41 In Tax Increases: http://www.prisonplanet.com/fiscal-cliff-deal-1-in-spending-cuts-for-every-41-in-tax-increases.html

[8] Eurozone debt crisis: it’s fiscal union or bust, says Pimco: http://www.prisonplanet.com/eurozone-debt-crisis-its-fiscal-union-or-bust-says-pimco.html

[9] US debt headed toward 200 percent of GDP even after ‘fiscal cliff’ deal: http://www.prisonplanet.com/us-debt-headed-toward-200-percent-of-gdp-even-after-fiscal-cliff-deal.html

[10] U.S. National Security Budget in Fiscal 2013 Will Be Nearly $1 Trillion: http://www.prisonplanet.com/u-s-national-security-budget-in-fiscal-2013-will-be-nearly-1-trillion.html

[11] Paul, Lee, Rubio Vote No on ‘Fiscal Cliff’ Deal that Hikes Taxes, Puts Off Spending Cuts: http://www.prisonplanet.com/paul-lee-rubio-vote-no-on-fiscal-cliff-deal-that-hikes-taxes-puts-off-spending-cuts.html

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