Standard & Poor's Downgrades U.S. Debt Rating

[Kuya]

Usually solanis is full of shit on just about everything, which is why it pains me to agree that he's right about this one. Kuya if you think the US should continue to have a AAA rating despite the disastrous state of the budget, your head is firmly planted in the sand my friend. You're in denial. Whether S&P is full of shit or not, all over the world people are starting to recognize that the US's financial position is crumbling. All the while billionaires continue to balk at the prospect of paying more taxes into the system that allowed them to amass such ridiculous fortunes in the first place. A deficit reduction plan with no new revenues is absolutely absurd.


The foxes are running the henhouse, and the average working american is the one who's going to feel the pain when the house of cards comes crumbling down. I'd love to say I'm happy to sit and laugh from the comfort of Canadian soil, but when America finds itself in the gutter, we're going to feel the pain too.

I've never argued that the US should have a AAA rating, mostly because i don't give a fuck. I don't intend to whine about profligate spending (or useless tax cuts) from Washington by using S&P's crap for proxy, mostly because S&P, just as much as the republicans and right-wing democrats want their massive spending cuts at the expense of real people who are in economic trouble. I'm not gonna pick the lesser of two evils, and side with one asshole against another.

[aurik]

I really doubt S&P wants massive spending cuts which are sure to push the economy into a tailspin.

I mean unless they're shorting pretty much everything, I guess.

[Andalusian girls]

I really doubt S&P wants massive spending cuts which are sure to push the economy into a tailspin.

I mean unless they're shorting pretty much everything, I guess.

They want us to deal with entitlement and defense and an absurd, inefficient tax code, those things that are bankrupting the nation and are projected to spiral out of control with the demographics shift.

But that would require adults in Washington and a spirit of sacrifice among the citizenry.

[Kuya]

S&P wanted 4 trillion in a deal to reduce the deficit

If Congress and the Administration reach an agreement of about $4 trillion, and if we to conclude that such an agreement would be enacted and maintained throughout the decade, we could, other things unchanged, affirm the ‘AAA’ long-term rating and A-1+ short-term ratings on the U.S.

Such an agreement naturally would have included spending, and even more naturally, in this political climate, it means most of it would have been spending.

But even if you say some of it should be spending cuts or entitlement reforms (a euphemism i hate), that still has a deflationary effect on an already weak economy with high employment.

For S&P to demand austerity now, is ridiculous, much like it was ridiculous for Obama and Paul Ryan to demand it now.

http://www.marketwatch.com/story/uni...ate-2011-07-14

[Headspace]

http://www.theonion.com/video/obama-...democra,21083/

[Andalusian girls]

S&P wanted 4 trillion in a deal to reduce the deficit

Such an agreement naturally would have included spending, and even more naturally, in this political climate, it means most of it would have been spending.

But even if you say some of it should be spending cuts or entitlement reforms (a euphemism i hate), that still has a deflationary effect on an already weak economy with high employment.

For S&P to demand austerity now, is ridiculous, much like it was ridiculous for Obama and Paul Ryan to demand it now.

http://www.marketwatch.com/story/uni...ate-2011-07-14

Any serious entitlement reform would be phased, have no deflationary impact in the immediate, and have a considerable positive psychological impact on the markets.

Introducing means testing, a delayed raising of the retirement age, and raising the amount of initial income that is taxed would result in no serious reduction in aggregate demand in the short-term. Simple measures, serious measures that would save social security.

[Kuya]

I think Krugman rightly conveys what i'm getting at here:

More than that, everything I’ve heard about S&P’s demands suggests that it’s talking nonsense about the US fiscal situation. The agency has suggested that the downgrade depended on the size of agreed deficit reduction over the next decade, with $4 trillion apparently the magic number. Yet US solvency depends hardly at all on what happens in the near or even medium term: an extra trillion in debt adds only a fraction of a percent of GDP to future interest costs, so a couple of trillion more or less barely signifies in the long term. What matters is the longer-term prospect, which in turn mainly depends on health care costs.

So what was S&P even talking about? Presumably they had some theory that restraint now is an indicator of the future — but there’s no good reason to believe that theory, and for sure S&P has no authority to make that kind of vague political judgment.

In short, S&P is just making stuff up — and after the mortgage debacle, they really don’t have that right.

So this is an outrage — not because America is A-OK, but because these people are in no position to pass judgment.

S&P made a 2 trillion dollar error, but decided to downgrade anyway:

As threatened, the ratings agency Standard & Poors has downgraded the country's AAA bond rating, despite acknowledging, according to multiple reports, that their initial calculations included a $2 trillion error projecting U.S.'s debt-to-GDP ratio over time.

Finally, S&P's downgrade is unlikely to raise interest rates at this time:

Spoiler: show

The humiliation of a credit rating downgrade for the U.S. would exact some psychological damage but is widely viewed as less likely to cause any actual carnage on interest rates.

Few fixed-income experts are looking for a major surge in rates even if Standard & Poor's follows through on its threats to cut the US rating from the coveted triple-A status down to double-A.

Indeed, yields perked up in early July, pushing toward 3.25 percent on the benchmark 10-year Treasury note, but have retreated since and were plunging toward 2.60 percent in afternoon trading Tuesday.

Bond auctions have been solid if not spectacular as of late, with investors more than willing to accept U.S. debt as the least-bad fixed-income investment while debt problems spread through the European periphery and the domestic economy falters.

"What we've seen happen over the past two weeks is, 1) a major downshifting of the U.S. economic data. That puts downward pressure on U.S. interest rates. And 2) we've seen upward pressure on Italian and Spanish interest rates," Tipp said. "That has raised the specter of contagion in Europe and raised a major flag for the world's central banks in terms of where they can put their money."

The weakened economy, in fact, is seen as something of an insurance policy against a surge in rates even if S&P does cut the U.S. debt rating.

The firm also believes a downgrade from S&P could come as soon as this week, but does not see it as "a disaster for the Treasury market or the dollar."

"The bigger picture is that the long-term fiscal position of the U.S. remains perilous," Dales wrote. "A raising of the debt ceiling and a package to reduce the deficit by between $1 trillion and $3 trillion over 10 years will do little to reduce net debt."

The final component in keeping rates low will be accommodative policy from the Federal Reserve , which will be pressured to hold its key funds rate close to zero as the economy struggles to stay above recession levels .

Even JP Morgan (lol) doesn't feel interest rates will rise because of the debt deal:

We don't think a downgrade is of first-order importance for economic growth: conditional on fiscal metrics such as debt-to-GDP ratios, we see no major implications for borrowing costs due to the actions of one or more rating agencies.

I repeat, S&P is full of shit.

http://krugman.blogs.nytimes.com/201...gman&seid=auto

http://tpmdc.talkingpointsmemo.com/2...k-negative.php

http://finance.yahoo.com/news/Debt-D...&asset=&ccode=

https://mm.jpmorgan.com/stp/t/c.do?i...tml*h_-1ni8eo3

[guartz]

Don't worry guys! The gang of 6 is here to save us.

The new bureaucratic level is full of quite capable leaders who managed to bribe themselves into this prestigious position and should have this entire mess solved in a jiffy.*













































*bullshit

[Kerberoz]

So how many levels do you have to fall to get a grade that isn't some form of "A"?

It's like they're teaching tards with low self-esteem and an A- is really an F.

[Tyche]

F is impossible, No Country Left Behind.

[Shuvo]

Gay, as an artificial commodity I was expecting bitcoins to shoot up in value over the last few days, especially if they they defaulted and lost their triple A rating. So I horded up on coins. >.< But the opposite instead happened, down to 9 usd per btc now the rich early adopters must have dumped everything they had I guess.

[test123]

I liked the part where the guy said the debate over the debt was a triggering factor. Like he was the running-boy of the Fed looking to shut-up any critisism.

[Talint]

Seems more like a stunt than anything to me. The other two agencies said the rating stays the same, and Paul Krugman gives some good reasons why it's pretty dumb.

And I trust Krugman more than the rest of you jabronis.

[Fhqwghads]

Whether S&P is full of shit or not, all over the world people are starting to recognize that the US's financial position is crumbling. All the while billionaires continue to balk at the prospect of paying more taxes into the system that allowed them to amass such ridiculous fortunes in the first place. A deficit reduction plan with no new revenues is absolutely absurd.

Totally agree. And this isn't a bi-partisan problem either, imo. All the elected officials who have continuously served corporate interests and their own agenda for decades are to blame. The handwriting was on the wall on this. Spending and raising the credit limit while having either the same or less income doesn't work for individuals, businesses, or government.

They kept putting off making hard decisions for too long while ignoring the real problem, and now it's come to a head. I put a lot of blame on the government sleeping with corporations. Politicians pay more attention to those who can lobby loudest, and that sure as hell isn't you and me.

Government for the people, by the people. Yeah right. Only when it comes time for all of us to pay the price for these fucking retards running the economy into the ground.

[Kuya]

I am increasingly alarmed at how leftists have adopted the right-wing rhetoric on how debt and the deficit is the primary problem America has right now.

[archibaldcrane]

Whoa. Mortgage rates are the lowest I've ever seen them (for a 30-year fixed 1 point or less 300k in LA). 4% flat? Shit.

Kuya's right though. If Obama's smart, he'll try to spin this as "the economy sucks because the House Reps won't let me do anything about it" (which would be a lie but could at least win him some sympathy).

You aren't going to get your stimulus though Kuya, this is going to be a very long, very slow recovery.

[Dalek]

Because it is? It's not rhetoric, it's a concern that affects everyone, right or left. Not sure where you're going with that one Kuya, care to elaborate?

[Demosthenes11]

Because it is? It's not rhetoric, it's a concern that affects everyone, right or left. Not sure where you're going with that one Kuya, care to elaborate?

why is debt suddenly a crisis? what changed?

[Kuya]

I'm saying that the quality of people's lives matters more than esoteric debates over debt and deficit. Especially when the latter is often used as a trojan horse by neoliberals to attack the welfare state.

[archibaldcrane]

Because it is? It's not rhetoric, it's a concern that affects everyone, right or left. Not sure where you're going with that one Kuya, care to elaborate?

You think that the #1 issue Americans face is the national debt?

Dude, we have like 11% unemployment.

Get some perspective.