SANTA MONICA, CA — (Marketwire) — 08/12/11 — The Milken Institute has just posted a paper by Ross DeVol, our chief research officer, titled, “Deficits, Debt and the Downgrade: Implications for Financial Markets and the U.S. and World Economies.” Summary points are below. See the paper at
While the criticism of S&P is not new, Ross is thorough in examining the rating agency-s errors and concludes with his view of the probability of recession and forecasts what job growth will be in the coming months.
About “Deficits, Debt and the Downgrade”
Was Standard & Poor-s justified in downgrading the U.S. credit rating to AA+ from AAA? Not at this point, says Ross DeVol, the Milken Institute-s chief research officer, in an analysis released today.
The rating agency-s $2 trillion mistake has rattled markets and called into question the safety of U.S. Treasurys. It has also raised further doubts about the rating agency-s credibility. DeVol points out that a key measure of future solvency shows the United States- prospects are superior to those of Germany, France, the U.K., Canada and Australia — all of which S&P rates AAA. And don-t forget that S&P-s involvement in rating mortgage-backed securities contributed to the financial crisis.
But with the rating downgrade already done, what-s ahead for the jumpy financial markets and economies at home and abroad?
Real GDP growth: DeVol predicts real GDP growth in the U.S. at around 2.0 percent in the second half of 2011 and 1.8 percent for the year.
Economic growth: He forecasts U.S. growth at 2.9 percent in 2012.
Job creation: Expect job gains of roughly 80,000 per month in the third quarter, 100,000 per month in the fourth quarter and 125,000 per month in 2012.
Double-dip recession: The probability is 35 percent if equity market valuations remain in today-s range.
Contact:
Jeff Monford
Interim Director of Communications
The Milken Institute
O 310-570-4623
M 718-809-3405