SOURCE: John Thomas Financial

April 20, 2011 10:15 ET

John Thomas Chief Economist Mike Norman Says S&P's Actions Will Not Affect US Sovereign Debt Valuations

NEW YORK, NY--(Marketwire - Apr 20, 2011) - Mike Norman, Chief Economist for John Thomas Financial, says Standard & Poor's downgrade of the US credit rating to negative will have no material impact on US sovereign debt valuations.

"S&P's analysis is flawed," said Norman, an expert on fiscal and monetary policy. "There is never a risk of default for a sovereign nation that issues its own free-floating currency and where its debts are denominated in that currency. No sovereign in history has ever defaulted under such an arrangement."

According to the 30-year investing veteran, "The only risk is exchange risk. However, S&P maintains the risk to be default even though it is categorically impossible. Moreover, there has been no attempt by S&P or any other rating agency to justify why some catastrophic exchange adjustment is bound to happen if government spending results in higher aggregate demand and by corollary, stronger economic growth. Indeed, the Dollar Index is above its 2008 low despite the fact that the deficit has more than doubled in that time."

Norman used Japan's credit rating to illustrate his point. "It was downgraded several times by the rating agencies. Yet yields on 10yr Japanese government bonds still remain at a historically low level of about 1.5 percent," he said.

"In interviews and testimony, Fed Chairman Ben Bernanke said the US government can meet any and all payments because operationally, spending is merely a matter of 'marking up bank accounts,'" he added.

An international economist and former trader, Mike Norman's career spans over 30 years on Wall Street. A widely respected financial news commentator, he has often been featured on CNBC, Bloomberg, CNNfn and Fox News. In 2003 he signed with Fox Business Network as an exclusive contributor. He appears regularly on Fox Business programs. He also writes the blog, Mike Norman Economics.

Mr. Norman is involved in the production of easy-to-understand videos discussing economic concepts that are distributed to school children. He has a BA in economics from the University of Pennsylvania and a Master's Degree from UCLA. He's a frequent guest speaker at numerous corporate and investment-related events.

About John Thomas Financial
John Thomas Financial, member of the FINRA and SIPC, is an independent broker-dealer and investment banking firm headquartered in New York City's Wall Street district. Emphasizing a client-centric approach to managing all aspects of its business, the firm offers a full complement of retail brokerage and corporate advisory services tailored to the unique needs of its clients. For more information on the firm, please visit www.johnthomasbd.com.

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Contact Information

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