S&P Downgrades US To AA+, Outlook Negative

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Discussion Overview

The discussion revolves around the recent downgrade of the US credit rating to AA+ by S&P, with a negative outlook. Participants explore the implications of this downgrade, the role of political factions in fiscal policy, and the broader economic context, including government spending and business behavior.

Discussion Character

  • Debate/contested
  • Exploratory
  • Technical explanation

Main Points Raised

  • Some participants suggest that the downgrade reflects a failure of political institutions and policymaking, particularly criticizing the Tea Party's influence on fiscal policy.
  • Others argue that the downgrade is a result of insufficient fiscal consolidation plans and that previous administrations contributed to increasing debt levels.
  • A participant points out that businesses are hoarding cash due to long-term debt uncertainty, which may hinder economic recovery.
  • Concerns are raised about the implications of hoarding cash and whether it will have long-term effects on the economy.
  • Some participants assert that threats regarding the debt ceiling had little impact on the downgrade, while others believe that the Republicans' focus on the debt issue was necessary.
  • There is a discussion about the credibility of credit rating agencies, with references to past investigations and allegations of bias in their ratings.
  • Participants express skepticism about whether the downgrade was influenced by political motivations or if it reflects genuine economic concerns.

Areas of Agreement / Disagreement

Participants do not reach a consensus; multiple competing views remain regarding the causes of the downgrade, the effectiveness of political actions, and the implications for the economy.

Contextual Notes

Some arguments depend on varying interpretations of fiscal responsibility, the role of different political parties, and the historical context of government spending. The discussion includes unresolved questions about the long-term effects of current economic behaviors.

  • #91
WhoWee said:
Actually, what you did was present a clip from an (apparently) low budget (perhaps) college radio show that played a very select and chopped Glen Beck clip. Worse yet, you did it in a thread regarding the "S&P Downgrades US To AA+, Outlook Negative" - is it because your primary intent is to be a troll?

Don’t make it worse than it already is. Do you want me to post the CNN video on the same topic? And give you a chance accuse them for "select and chop" as well??

Please WhoWee, drop it. You’re making a fool of yourself (completely unnecessary IMHO).

Didn’t you tell me to move on??
 
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  • #93
DevilsAvocado said:
Don’t make it worse than it already is. Do you want me to post the CNN video on the same topic? And give you a chance accuse them for "select and chop" as well??

Please WhoWee, drop it. You’re making a fool of yourself (completely unnecessary IMHO).

Didn’t you tell me to move on??

I requested you move it to an appropriate thread.
 
  • #94
  • #95
DevilsAvocado said:
Did I hear someone (who seems to have lost it completely) mention "Breivik-inspired rhetoric"?? :bugeye:

congrats, you've found your intellectual equal in Michele Bachmann.

also, you think this is what she thinks the markets are responding to?
uYzUL.jpg
 
  • #96
:zzz:
 
  • #97
It looks like this is going to be a 'battle' of trustworthiness between S&P and the U.S. government. Timothy Geithner has already started:

http://finance.yahoo.com/news/Geithner-SampP-showed-apf-713857951.html?x=0&sec=topStories&pos=main&asset=&ccode="

What happens if the market, Moody's and Fitch completely ignores S&P, and not much happens?

John Chambers looking for a new employer...?
 
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  • #98
DevilsAvocado said:
It looks like this is going to be a 'battle' of trustworthiness between S&P and the U.S. government. Timothy Geithner has already started:

http://finance.yahoo.com/news/Geithner-SampP-showed-apf-713857951.html?x=0&sec=topStories&pos=main&asset=&ccode="

What happens if the market, Moody's and Fitch completely ignores S&P, and not much happens?

John Chambers looking for a new employer...?

Chris Wallace asked David Beers directly about the $2Trillion difference in calculations.
http://foxnewsinsider.com/2011/08/07/highlights-fox-news-sunday-interviews-with-sps-david-beers-rep-paul-ryan-and-legg-masons-bill-miller/#more-73463

"Q: The White House isn’t happy – they say you made a $2 trillion overstatement and then changed your justification for the decision…

Beers: “[That's a] complete misrepresentation of what happened. When we made the modification, we did so after talking to the Treasury; it doesn’t change the fact that even with an agreement, that the underlining debt is building and is rising and will continue to rise.”"

Is it wise for the Administration to engage S&P in this manner?
 
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  • #99
WhoWee said:
Is it wise for the Administration to engage S&P in this manner?

I have no idea WhoWee, sorry.
 
  • #100
9:27pm edt

N225 -1.30%
NZ50 -2.24%
STI -2.42%
KS11 -1.46%
TWII -1.54%
 
  • #101
DevilsAvocado said:
It looks like this is going to be a 'battle' of trustworthiness between S&P and the U.S. government. Timothy Geithner has already started:

http://finance.yahoo.com/news/Geithner-SampP-showed-apf-713857951.html?x=0&sec=topStories&pos=main&asset=&ccode="

What happens if the market, Moody's and Fitch completely ignores S&P, and not much happens?

John Chambers looking for a new employer...?

The downgrade could backfire on S&P because it is political in nature. So they may run into a situation where they are not seen as relevant.
 
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  • #103
My teeth hurt as I watch the Left Wing and media attacks on the credibility of S&P - wasn't dumping the blame on the TEA Party a big enough solution for them?

The Left Wing and the media have moved past playing political games - now they are playing chicken with the credit rating agency - IMO.
 
  • #104
  • #105
WhoWee said:
The DJI is off about 3% - 350 points at 10:35 AM Easterm 8/8/11.

and the VIX touched 40!
 
  • #106
WhoWee said:
My teeth hurt as I watch the Left Wing and media attacks on the credibility of S&P - wasn't dumping the blame on the TEA Party a big enough solution for them?

The Left Wing and the media have moved past playing political games - now they are playing chicken with the credit rating agency - IMO.

Keep in mind, S&P royally screwed up its rating of high-risk mortgage products for years. That incompetence was a huge contributor to this recession. I think it's totally legit to question their credibility.
 
  • #107
lisab said:
Keep in mind, S&P royally screwed up its rating of high-risk mortgage products for years. That incompetence was a huge contributor to this recession. I think it's totally legit to question their credibility.

I think a comprehensive Congressional hearing into the matter is called for - let Barney Frank and Chris Dodd explain what happened - why they depended so heavily on the ratings agencies perhaps?
 
  • #108
lisab said:
Keep in mind, S&P royally screwed up its rating of high-risk mortgage products for years. That incompetence was a huge contributor to this recession. I think it's totally legit to question their credibility.

Didn't all the major credit rating agencies rank high-risk mortgages as AAA because they were backed up by the government?
 
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  • #109
Lapidus said:
http://www.nytimes.com/2011/08/08/opinion/credibility-chutzpah-and-debt.html?src=recg

the problem did not start with the ratings agencies on mortgage backed securities. the problem started when financial industry people lobbied the US Congress to deregulate it, removing the restrictions on "gaming". Gaming means gambling. the US Congress decided that wall street could now legally operate as a casino. did we ever change this back? I'm not sure, to be honest. the other issue i think would be the lack of transparency in the system. how about making all transactions in securities public? that might help ratings agencies do their job. how are they supposed to do it now?
 
  • #110
Proton Soup said:
the problem did not start with the ratings agencies on mortgage backed securities. the problem started when financial industry people lobbied the US Congress to deregulate it, removing the restrictions on "gaming". Gaming means gambling. the US Congress decided that wall street could now legally operate as a casino. did we ever change this back? I'm not sure, to be honest. the other issue i think would be the lack of transparency in the system. how about making all transactions in securities public? that might help ratings agencies do their job. how are they supposed to do it now?

The derivatives market (unregulated) has prospered off-shore - as discussed in other threads - follow the bailout funds to European banks (if you took your blood pressure medicine this morning) - label IMO.
 
  • #111
WhoWee said:
The derivatives market (unregulated) has prospered off-shore - as discussed in other threads - follow the bailout funds to European banks (if you took your blood pressure medicine this morning) - label IMO.

yeah, and why was the federal reserve bailing out those bozos? I've been meaning to try and dig through what was the Ron Paul FED audit, but got frustrated the first time on not finding the details.
 
  • #112
The President is addressing the downgrade in 10 min.
 
  • #113
SixNein said:
The downgrade could backfire on S&P because it is political in nature. So they may run into a situation where they are not seen as relevant.

True, I think "political" is the keyword here, in several 'dimensions'... it seems this is not mainly about the dollars.
 
  • #115
czelaya said:
Didn't all the major credit rating agencies rank high-risk mortgages as AAA because they were backed up by the government?

I think it was mainly S&P and Moody's when it comes to subprime loans and the 2008 Financial Crisis, but it looks like they all have http://en.wikipedia.org/wiki/Credit_rating_agency#Criticism" when it comes to credibility.

Whether S&P and Moody's were backed up by the government or not, the services they provided were not (understandably) appreciated:

Part 1 -- 2008 Financial Crisis: Credit Rating Agencies commit fraud/ incompetence

https://www.youtube.com/watch?v=19amWOc1GJ8

Part 2 -- Credit Rating Agencies Scandal: massaging numbers/ I.B.G.,Y.B.G.

https://www.youtube.com/watch?v=eYdTnNzttxk
 
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  • #117
Dji < 11,000.00 !
 
  • #118
Interesting commentary here -
http://finance.yahoo.com/blogs/breakout/u-gets-downgrade-deserves-133206142.html

One of the comments: "One Nations, underwater"

With respect to the subprime junk (MBSs and CDOs) that was rated by Moody's, S&P and Fitch (ratings require two of the agencies) as AAA, that wasn't incompetence as much as negligence, if not downright fraud. However, they were offering an opinion, which is apparently protected by the first amendment, and apparently not an objective assessment based on any thorough analysis. Or they simply took the money (effectively a bribe or kickback) and gave undeserved ratings.

The subprime mortgages were generated by unregulated mortgage originators, some of which become subsidiaries of the big banks or Wall Street investment firms. Those subprime mortgages were not guaranteed by the Federal government.


Countrywide had a pipeline to Fannie Mae. Fannie Mae and Freddie Mac contributed to the housing bubble, but they weren't the whole story. There was widespread fraud among primary mortgage company and complicity on the part of Wall Street, the financial industry and the ratings agencies, as well as regulators who didn't regulate.

Read Gretchen Morgenson's and Joshua Rosner's Reckless Endangerment.
http://www.nytimes.com/2011/05/29/b...-by-gretchen-morgenson-and-joshua-rosner.html

S&P was generous. The US credit rating should probably be AA- or less.

At $14 trillion in debt, it would take 140 years to pay off the debt at $100 billion/yr. Actually the payments would be more, so the debt could be paid down faster, although not as quickly if interest rates rise considerably. On the other hand, the US could default on some or all of the debt.
 
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  • #120
Did anyone else hear the President call for more spending, the extension of the reduction in funding to Social Security (about $10 per week for people who have jobs), and tax increases? At least he's willing to talk about fixing Medicare and Social Security - I just can't figure out how a decrease in Social Security payroll deductions does that - can anyone explain it?
 

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