What does US credit downgrade mean for Americans savings accounts
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00:00 Scott Mark Tepper here, the Strategic Wealth Partner, President, CEO, no longer AAA.
00:05 Yep.
00:06 What do you think?
00:07 Well, look, I think as you kind of alluded to, I think Moody's is probably next in line
00:11 to follow suit with S&P and Fitch.
00:14 We are in a world of hurt right now.
00:15 I mean, we're talking about $32 trillion in debt.
00:18 We're still running a deficit of like $1.5 trillion per year.
00:22 We haven't run a budget surplus since 2001, I think was the last time.
00:28 And we are now in a situation where this time actually is a little bit different because
00:32 50 percent of that $32 trillion needs to be refinanced in the next two and a half years
00:38 at much higher interest rates.
00:40 So whenever interest expenses as a percentage of tax revenues crosses above 14 percent,
00:48 we are knocking on the door right now, 14 percent.
00:51 When it goes above, the market forces austerity.
00:54 And that's exactly what's happening.
00:55 But Fitch called us out for more, right?
00:57 They reminded me of like the exasperated parent who just said, I can't believe you kids.
01:01 You can't get your act together.
01:03 You can't resolve these crises.
01:04 You're always on the verge of shutting down.
01:06 You spend like drunken sailors, you know, the whole nine yards.
01:09 And they just finally said to hell with it.
01:11 Now, we are still a haven for the world and money that comes into the world.
01:17 And we were and have been since, you know, S&P pulled this a dozen years ago.
01:21 So will that change?
01:24 I don't think that is going to change at any time in the near future.
01:28 I heard Shagalani talking about, you know, I am concerned in the longer term about the
01:33 dollar losing its reserve currency status.
01:36 I've never lived during a period of time when the dollar wasn't the reserve currency.
01:40 I don't want to learn what it's like.
01:42 We're going to lose a lot of those special privileges and benefits.
01:44 And there's a cash that comes with that.
01:46 If you're sort of like the big draw of your currency is the big draw and then you're not,
01:50 then all bets are off.
01:51 So let me ask you a little bit about where you see this going, because the administration,
01:55 of course, has been touting the fact that economic numbers are improving.
01:59 We've had a dozen inflation reports that have steadily gone down.
02:02 Yeah, still high, but not nearly as high as it was.
02:04 And they're planning to unleash that in September when it's about the economy, economy and things
02:09 picking up.
02:10 What do you look, the economy?
02:11 Without a doubt, if I look at all the different economic data points, the economy seems to
02:15 be relatively healthy with the exception not in this recession camp.
02:20 I am.
02:21 I was I was expecting it by the end of the year.
02:24 Saying by the end of the year, we could be looking at it latest the first quarter next.
02:28 So I think first second quarter of next year, I kind of pushed it out a little bit.
02:32 So the senior loan officer survey, which measures bank tightening standards as it relates to
02:37 lending that is highly recessionary right now.
02:40 And if we go back to 2007, at the end of 2007, the Fed was talking soft landing.
02:46 They thought the housing crisis was not going to be a crisis.
02:49 Every single economic data point was surprising to the upside, except for the senior loan
02:55 officer surveys.
02:56 And when banks tighten credit, job losses soon follow.
03:00 Within two months into 2008, we were now in a recession.
03:05 But sometimes they don't even have to tighten credit of consumers saying, I must.
03:08 We don't have any more money to play with or not as much.
03:10 Of course, you're not seeing it, you know, in a lot of traditional things like still
03:14 packed planes, still packed cruise ships, yeah, hotels and all of that.
03:18 But it might be on its last spurt, you think.
03:20 You know what, though?
03:21 There's one thing that that's kind of underappreciated in this this market rally, and that is the
03:26 fact that savings accounts are now paying a risk free 5 percent.
03:31 Yeah.
03:32 OK, so that's competition for stocks right there.
03:34 Right.
03:35 And that equates to 20 billion dollars a month in excess spending available to people that
03:40 have accumulated savings.
03:41 Now, that's not going to help the bottom 20 percent of earners who probably don't have
03:45 a lot of savings.
03:47 But for the people, you know, maybe in the top 50 percent who have money in money markets
03:52 and savings accounts and not everything in the stock market, that is certainly a tailwind
03:56 for them to spend.
03:57 Yeah.
03:58 And you've got the full protection of Uncle Sam behind it.
04:00 So four or five percent versus a market that can get kind of a little volatile.
04:05 That's not a bad deal, is it?
04:06 I mean, especially given the risk reward that we're looking at with stocks right now.
04:09 I mean, yeah, it doesn't hurt to rethink the asset allocation mix.
04:12 And that's a young guy saying that.
04:15 I think I'm considered middle age.
04:16 Hop into money.
04:17 There you go.
04:18 All right.
04:19 Thank you.
04:20 My middle age friend, Mark Dapper.
04:21 Not not not.
04:22 Hey, Sean Hannity here.
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