Skip to comments.Rating downgrade: Did S&P get it right?
Posted on 08/07/2011 5:33:43 PM PDT by mlocher
A credit rating is an informed opinion. Nothing more. Nothing less.
That helps explain why one major credit rating agency -- Standard & Poor's -- has downgraded the United States, while another -- Moody's (Symbol : MCO
) -- has chosen to affirm its credit rating with caveats.
Both agencies had the same essential set of facts about U.S. debt: There's a lot of it now. There's a lot more of it to come. And there's very little in the way of actual policy today that looks likely to seriously change that outlook.
Where the agencies differ, however, is in their degree of skepticism that Congress will follow through on meaningful debt reduction.
S&P is pessimistic. It points to the reckless debt ceiling debate, which artificially tied the longer term need to reduce the debt with the immediate need to raise the borrowing limit to ensure the United States makes good on all its bills.
"The political brinksmanship of recent months highlights what we see as America's governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed." S&P said Friday in downgrading the United States to AA+ from AAA.
In some ways, it's easy to see why S&P is so pessimistic. Throughout the struggle to raise the debt ceiling, some lawmakers repeatedly suggested it would be better to risk default and not raise the ceiling until Congress passed a spending-cuts-only plan to reduce debt. (Read: Who is in the AAA club?)
"We clearly pose more of a risk to investors than we did previously. We're the only developed nation in the world that talks openly about default," said Donald Marron, a former acting director of the Congressional Budget Office.
(Excerpt) Read more at news.fidelity.com ...
Yes, it is.
S&P didn’t go nearly far enough. Treasuries are worth about a _C_ at best, but we can be sure that socialists will continue to rob bond investors.
“Rating downgrade: Did S&P get it right?”
No, because AA still implies that they expect the debt to someday be repaid. IDIOTS !!!
CNN whistling past the graveyard.
na.... they messed up they should of downgraded Obama’s economy to junk.
I stopped right there. I couldn't go any farther. LOL!
- Obama: “S&P made 2T error”
- Axelrod: “TP’s fault”
- Geithner: “Didnt really happen.”
- DNC- “Taxes too low and spend more”
- Chicoms- “The days of borrowing your way out of messes is over”
Obama’s fiduciary competence rating: F-
If CNN actually investigated or analyzed an issue their own ratings would not be in the tank as are Obama’s ratings.
At some point CNN is going to realize that carrying water for Obama is hazardous to their financial health.
The Democrat party downgrade is just another brilliant gift from His Hope and Changiness.
This is the change you voted for?
S and P’s prez made it clear. They wanted to see 4 trillion in cuts in the next 5 years. Only plan that would have done that was shut out by Harry Reid. Tea Party not to blame!
It is hazardous. I don't think CNN and its owner cares.
- MSNBC: “S&P are racist”
S&P must have been awfully optimistic in 1941 since the bonds weren't payable in Yen or Reichsmarks. I don't think that it was considered a sure thing that we would win WW2 in 1941.
The dollar has been declining and the price of gold increasing since 2001. Somebody isn't surprised by this.
Let’s get it straight liberals. This is not the tea party’s fault. WE WERE TRYING TO BALANCE THE BUDGET IN ORDER TO AVOID THIS. YOU WERE THE ONES FIGHTING US EVERY GD STEP OF THE WAY YOU OBNOXIOUS, DELIRIOUS, OVER SPENDING, SOCIALIST *%#@s. We tried like hell to cut spending. But you convinced yourselves that spending more than you take in is a perfectly reasonable acceptable course of action. This is your fault liberals and you will most certainly be held accountable.
Or could S&P be playing power politics for the ‘12 elections?
Those who are too young to vote or are not yet born are not responsible for this debt. They should refuse to pay it. What is the chance the rest of us will get the debt paid off?
Lets get it straight liberals. This is not the tea partys fault. WE WERE TRYING TO BALANCE THE BUDGET IN ORDER TO AVOID THIS. YOU WERE THE ONES FIGHTING US EVERY GD STEP OF THE WAY YOU OBNOXIOUS, DELIRIOUS, OVER SPENDING, SOCIALIST *%#@s. We tried like hell to cut spending. But you convinced yourselves that spending more than you take in is a perfectly reasonable acceptable course of action. This is your fault liberals.
RIGHT YOU ARE!!
you will most certainly be held accountable.
Doubt it, sorry.
Asian stock markets are now open.
Nikkei 225 9,202.10
8:42PM EDT -97.78 (1.05%)
You’re right. We won’t get it paid off. This is a debt regime headed full speed for default. So teach at least one humble young person to do some kind of technical work or repair. Let the vain go to their consequences.
It’s a fight that I will happily take up. They want to blame us for this? Bring it.
Good point. Those who develop some skills and are willing to work will do well.
Alls I knows is dis.
I ain’t buyin’ no gubmint treasure bonds no how!
The only ones to talk about default were Democrats. Everyone with a brain knew that not raising the debt ceiling did not mean default as there was plenty of revenue coming in to pay our sovereign debts. I did not hear one "tea party" person, or even Republican, suggest that we should default.
CNN, as usual, is full of BS.
Alan Greenspan...Answer: "Very much so. This is not an issue of credit rating, the United States can pay any debt it has because we can always print money to do that. So, there is zero probability of default."
don't worry, the bonds will be repaid as they come due. The only question is just how worthless the repayment dollars will be.
“NBC...Question: “Are U.S. treasury bonds still safe to invest in?”
Alan Greenspan...Answer: “Very much so. This is not an issue of credit rating, the United States can pay any debt it has because we can always print money to do that. So, there is zero probability of default.”
Amazing. And it’s not like the Chinese don’t watch these shows (or even frequent these websites - hi Phoebie). In a few short years, the Chinese will calmly ask us to start paying them back. A few years after that, they will demand repayment. And a few years after that, once they have the means, they will come here and collect....while we’re still waiting for the green economy to materialize and going broke paying off baby boomers.
“S&P didnt go nearly far enough. Treasuries are worth about a _C_ at best, but we can be sure that socialists will continue to rob bond investors.”
The writing was on the wall when Bush-43 was prez, but it became OBVIOUS in 2009 when Obama was hell-bent to keep spending money despite the trillion plus deficits. That’s when I ‘rebalanced’ my savings and started stockpiling. This day had to come...but they would have served us MUCH, MUCH, better if it had been 2009 (or earlier).
Instead of trading for US products, China has chosen to trade their dollars for US Treasury debt in place of computers, natural resources, airplanes, etc. Thus our trade deficit, as normally defined, was necessary for our national debt to accumulated in the manner it has.
Either they'll have to find another use for the dollars, keep buy questionable US Treasury bonds, find another country to dump there products in or stagnate (just like Japan).
For all of China's talk, they're also in a bad spot.
True enough; however, who suffers worse if that debt is downgraded? Who suffers worse if the debtor starts to default and/or repudiate? China, obviously, takes a big hit, but is there a scenario under which the Chinese Communist Party might consider the hit to be worth the results?
“For all of China’s talk, they’re also in a bad spot.”
All things are relative. Essentially the Chinese gave us their goods, as they had probably figured out that we’d never pay them back.
When they come to terms with that, they’ll write us off (i.e., no more trade priced in dollars) and then look to the 800,000,000 or so people that they have in their own country that could use the same products, and perhaps even pay them in hard currency. They’ll also be able to trade with most countries around the world, as their currency will have value.
The only question left for us is whether we keep our nuke deterrent intact as we collapse (as Russia did when they collapsed). If we manage to do that, we may be left alone until we can (hopefully) get liberals out of the way and start the long, slow, rebuilding process.
S&P is behind the market as usual.
US credit default swaps are trading at 68 basis points which corresponds to a rating of BBB. That’s the present.
The future outlook is far worse. Any businessman given control of a company with a balance sheet like the US has would immediately demand a bankruptcy filing as a necessary prerequisite to restoring financial health.