Classically, junk bonds or junk debt has been defined by Moody’s, S&P and Fitches, the three principal rating services in the United States, as being any debt obligation whose credit rating is less than Triple B.
To reiterate, the startling credit quality deterioration in the United States under the Bush Cheney Regime has now been globalized, as more and more foreign governments and corporations begin to operate under the theory of Bushonomics.
Indeed, and this is important to note, we have seen that under the Bush Cheney Regime, 38% of the S&P 500 stocks, for instance, have been downgraded as to their credit quality.
So what is the conspiracy? The conspiracy comes in a sublime effort by governments and their allies in financial media to gussy up, as it were, junk bonds, and to make junk bonds more acceptable as a mainstream investment.
What we’ve seen then is the “mainstreaming,” as it were, of junk debt, as junk debt becomes increasingly substituted for investment-grade debt in mutual fund bond portfolios, for instance, that many average investors own.
Even more startling and more sinister is the increasing substitution of junk debt within governmental, social security, and other government and corporate-sponsored pension programs.
To reiterate, junk debt is any publicly traded debt issued by a government or corporation with a credit rating of less than Triple B. Today there are thousands of corporate issuers in the United States of junk debt.
If you look at them by industry sectors, you would see that almost all of the telecom sector are issuers of junk debt. Within the retail sector is also a large concentration of junk debt issuers. You could go on and on and on with individual corporations.
What I think is the most sinister and dangerous part of this conspiracy is the increasing substitution of junk debt for investment grade debt within government pension systems globally.
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