Skip to comments.S&P statement on lowering US long-term debt to AA+
Posted on 08/05/2011 9:28:50 PM PDT by freespirited
We have lowered our long-term sovereign credit rating on the United States of America to 'AA+' from 'AAA' and affirmed the 'A-1+' short-term rating.
We have also removed both the short- and long-term ratings from CreditWatch negative.
The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics.
More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011.
Since then, we have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government's debt dynamics any time soon.
The outlook on the long-term rating is negative. We could lower the long-term rating to 'AA' within the next two years if we see that less reduction in spending than agreed to, higher interest rates, or new fiscal pressures during the period result in a higher general government debt trajectory than we currently assume in our base case.
(Excerpt) Read more at guardian.co.uk ...
Read the full pdf. It’s a disaster. On one hand, they say they aren’t taking a position on spending cuts versus tax increases. On the other hand, they mention new revenues three times in a favorable light.
Expect the dems and the liberal media to glom on to that and make political hay of it.
They are essentially blaming the GOP for not letting “revenues” be raised - tax hikes and elimination of tax breaks!
Very interesting. The owner of S&P is McGraw Hill.
Pre-Marketing: S&P for sale?
Big breakup? Activists put pressure on S&P owner McGraw Hill
Here is more about McGraw Hill:
However, in contrast with the U.S., we project that the net public debt burdens of these other sovereigns will begin to decline, either before or by 2015" Standard & Poor's "
“Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act. Key macroeconomic assumptions in the base case scenario include trend real GDP growth of 3% and consumer price inflation near 2% annually over the decade.”
“Uh, that’s uh, okay-just put it on my Uncle Sam card!”
IMF considers US debt as $203T, not $14T...look up Kotlikoffs figures.
Weiss Ratings beat S&P to the punch:
Weiss Ratings Downgrades United States Debt to C-Minus
Weiss Ratings, an independent rating agency of U.S. financial institutions and sovereign debts, has downgraded the debt of the United States government from C to C-minus.
The C-minus rating for the U.S. reflects a continued deterioration in the weaknesses cited in the Weiss Ratings release of April 28, 2011, including heavy debt burdens, shaky international stability, and poor economic health.
Weiss Ratings senior financial analyst Gavin Magor commented: Our downgrade today is not contingent on the outcome of the debt ceiling debate in Washington. It is driven exclusively by the numbers, which indicate that, in addition to a decline in the long-standing weaknesses we noted three months ago, the U.S. has already lost the golden halo that helped guarantee liquidity and acceptance of its government securities in global markets.
On the Weiss Ratings scale, which ranges from A (excellent) to E (very weak), a C-minus rating is the approximate equivalent of a triple-B-minus on the scales used by other credit rating agencies, or approximately one notch above speculative grade (junk).
About Weiss: By adhering to its independent business model, Weiss outperformed Standard and Poors, Moodys, A.M. Best and Duff & Phelps (now Fitch) in warning of future life and health insurance company failures according to a 1994 study by the U.S. Government Accountability Office (GAO), while also outperforming its competitors in identifying the safest insurers, according to its follow-up study using the GAOs research methodology.
U.S. Sovereign Debt Rating Close to Junk
by Weiss Ratings | July 14, 2011
Weiss Ratings is very close to downgrading the sovereign debt rating of the United States one more notch to a C , which will put it just one notch above junk, Martin Weiss, President of Weiss Ratings told CNBC on Wednesday.
In April, Weiss Ratings gave the U.S. sovereign debt rating a C. A C is equivalent to approximately a triple-B on the S&P, Moodys and Fitch scales. Its two notches above junk, Weiss told CNBC in May. Weiss added that while the rating was weak, the debt situation was not in a danger zone that should trigger panic.
In yesterdays interview with CNBC, Weiss responded to Moodys Rating Agency placing their U.S. triple-A rating on review for a downgrade in the coming weeks on mounting concern that legislators will fail to raise the debt limit in time to avert potentially drastic effects.
The U.S. government is deadlocked in negotiations to raise the $14.3 trillion debt ceiling by August 2 before a potential default. President Obama announced on Tuesday, that failure to increase the debt ceiling would jeopardize payments to Social Security and Veterans benefit recipients.
Weiss believes a downgrade by the large rating agencies is long overdue, noting that the top-notch standard assigned to the U.S. is unfair to investors and savers as they are not being compensated for the level of risk they are taking.
The U.S. has a huge debt load compared to most other countries, he said. And, has a very unstable economy over the last 10 years compared to most other countries. The U.S. ratio of debt-to-gross domestic product is currently over 90 percent.
The only thing thats really holding up the U.S. debt rating is a widespread international acceptance for U.S. Treasury securities and nice strong liquid market. But even that might be coming into question, according to Weiss.
Weiss is hopeful that a last minute deal will fend off a potential crisis for U.S. and world markets. He pointed out that three years ago the legislatures failure to pass a bailout package sent markets into a tailspin, and forced Congress to sign off on it.
He said, We might see a similar scenario here in the debt ceiling debate, a failure at first and then a desperate deal in the thirteenth hour to rescue the situation at the last minute.
Based on the governments continued failure to agree on terms for raising the U.S. debt ceiling and the looming deadline, Weiss Ratings is reviewing its current C, rating signaling consumers that a C- rating might be a fairer assessment under the circumstances.
Moodys, S&P Caved In to Ratings Pressure From Goldman, UBS Over Mortgages
S&P can be bought off. Somebody wanted a higher return from Treasury bonds. Some Obama friends? The Chi-Coms? Who?
The market capitalization is off $1.4 trillion since this lunacy started. If the markets react to this news on Monday with a 1000-1500 point drop then $4.0 trillion of market cap..peoples 401k’s, pensions, market accounts will have disappeared. That's sure a way to get the country on the road to fiscal responsibility.
Anyone voting for any of these fools in the next election deserves what they get..
It was just to satisfy the Democratic base.
What did Obama & the obstructionist Senate say?
Harry Reid: "Over, Done, Dead"
White House: "Duck, Dodge and Dismantle."
Take the people who provide the revenue down first - then the government will crash instead of slide into oblivion...
OK, it seems to me that a lower rating that suggests even a slightly higher risk will require a higher return to match the increased risk. I am no expert but it seems to me that a bond worth less results in a higher return.
Let me ask you and all others reading this a question.
Is S&P too big to be held liable? No one cares that it appears there is proof that S&P was one of the key enablers of the financial meltdown that led to this mess?
No one cares that S&P could well be the Arthur Andersen of the bond ratings industry?
Personally their holier-than-thou attitude is wholly annoying!
Obama wanted to bring this fight over wealth transfer to an international crisis and that is why he threatened to default on the US debt if he did not get his tax increases.
The limo liberal bankster community agree with Obama and are using the political show down to prop up his demand for heavy taxation. They wanted socialized medicine, too, so corporations would not be saddled with this employee benefit. They want heavy income taxes on the middle class to pay for it and the debt.
I think this is an internationalist political battle against the people of the US because we continue to defeat their efforts. For example, we rejected their global warming scam and their self-serving solution - UN taxation (carbon trading) and their new carbon commodies “market.” We won’t buckle under the international court. We bristle at them using our military as they choose. We won’t accept open borders and shira. We created a political backslash when they dipped into the Treasury and Fed for their own profit.
This is economic punishment against Americans for disobeying their internationalist superiors and being uppity Americans. If you don’t want your economy to crash, do what we say politically.
I think you have some excellent points. Even without an all-powerful cabal there are enough one-world advocates who will use their “bankster community,” international and U.S. government influence to, as the 1960s radicals (spoiled brats) used to say, “Bring it all down, man.”
I know they mean "revenues" as a synonym for raising taxes. But, given the long historical evidence that revenues change as a result of the status of the economy, and not as a result of tax rate changes--wouldn't "raise revenues" properly mean "improve the economy"?
No doubt the “sixties” radicals are in power now - in government, nonprofits and business and globally. What unites them is a Marxist utopian belief structure and a sense of superiority that always accompanies megalomaniacs. We have been watching them operate and resisting them for a long time. They arrived.
Not really, the two don't have a correlation like that. A bond that is worth less is simply worth less and will take a harder sell to get someone to buy it. People will gamble one high risk stocks for a chance at a higher return but there's no guarantee, the return may be lower or negative.
I don't see a plot from great banking bogeymen, but a serious symptom of failed socialist policies here and abroad.
So Standard and Poor’s is now in the business of legislating the USA? I think not.
I think nothing would have averted the downgrade... the “crisis” was in the works by those who planned it.
I believe you are correct. Unfortunately there are many who believe revenue equals taxes alone.