Author Topic: US credit rating lowered by S&P.  (Read 2788 times)

Offline Baggins

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US credit rating lowered by S&P.
« on: August 05, 2011, 07:42:25 PM »
http://blogs.wsj.com/marketbeat/2011/08/05/sp-downgrades-u-s-debt-rating-press-release/

Well, the US rating has just been lowered for the first time in history by one of the major credit agencies.

Moody is still threatening to lower the US rating as well.

Since this hurts busineses the most, its already being said this will probably be pushed onto the consumer (prices will go up on everything).

Stock markets are diving around the world. Europe is worried about defaulting.

I never thought I'd ever experience anything like this in my lifetime... But what little did I know...

So what's next, another deep recession, depression, hyper-inflation?... What interesting times we live in, stay safe.
« Last Edit: August 05, 2011, 07:44:56 PM by Baggins »
Well, ya, King's Quest is on Earth. Daventry is very old city from a long time ago. It's in ruins now and people aren't quite sure exactly where it used to be. There are some archaeologists searching through the ruins, they think they know its Daventry. But its somewhere on Earth."-Roberta Williams http://kingsquest.wikia.com/wiki/File:Daventryisearth.ogg

Offline wilco64256

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Re: US credit rating lowered by S&P.
« Reply #1 on: August 05, 2011, 09:56:46 PM »
This is why I've learned how to make cookies from scratch, those rolls of dough are going to become just WAY too expensive.
Weldon Hathaway

Offline Baggins

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Re: US credit rating lowered by S&P.
« Reply #2 on: August 05, 2011, 10:05:12 PM »
Hah hah, even the bread crumbs might become expensive!

More tightening of the belt, maybe I can actually lose those belly rolls I've been accumulating! It's like survival fat! Just as long as I can get enough water!
Well, ya, King's Quest is on Earth. Daventry is very old city from a long time ago. It's in ruins now and people aren't quite sure exactly where it used to be. There are some archaeologists searching through the ruins, they think they know its Daventry. But its somewhere on Earth."-Roberta Williams http://kingsquest.wikia.com/wiki/File:Daventryisearth.ogg

Offline glottal

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Re: US credit rating lowered by S&P.
« Reply #3 on: August 06, 2011, 07:37:26 AM »
Well, I'm not terribly surprised it happened.  If S&P had been following for the United States the same criteria they have for a bunch of other countries, the downgrade would have happened even sooner - they probably delayed the downgrade 'cause it's the US of A.

That said, a downgrade, while bad for the economy, is not nearly as bad as a lot of the other things which are going in the economy (like unemployment, tainted titles, unstable banks, etc) - it's as if somebody whose legs have gangrene just got a bruise.  Many institutional investors can still hold US Treasuries as if they were still AAA due to a bunch of legal loopholes, and people will still buy Treasuries because, as a finance blog I read today said, the US dollar still wins the beauty contest among Cinderella's ugly stepsisters.  Also, the United States has a trade deficit, so the countries which sell us stuff have to buy something with their US dollars, and US Treasuries are still "safer" than almost all of the alternatives.

EDIT: Also, the credit rating agencies destroyed whatever credibility they had among investors who pay attention back in 2008 when a bunch of the trash that the credit agencies rated AAA went belly-up.  This is another reason why the credit downgrade will only have a minimal effect - serious investors were already relying on their own analyses and only follow the official credit ratings to predict the behavior of institutional investors (and the institutional investors, as I said, have various loopholes at their disposal around their legal requirements, and aside from their legal requirements, they are going to act like other serious investors).
« Last Edit: August 06, 2011, 08:45:12 AM by glottal »

Offline Baggins

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Re: US credit rating lowered by S&P.
« Reply #4 on: August 06, 2011, 09:31:23 AM »
Ya, its a wonder that the credit rating wasn't lowered a few years ago, let alone now!

I'm still wondering if our current credit system, credit agencies, etc, are going to mirror many of the same problems that lead to the Great Depression at the end of the Roaring Twenties! Speculating, IOUs, bubbles, etc.

There is some talk among various world economists, that worry what happens if the Fed decides to print more dollars, to try to 'buy off' some of the debt. Which would further inflate the money, leading it closer to 'funny money' since there is nothing backing it. They see the 'dollar' as being the next potential bubble, if US isn't careful. Even China (and Russia) are getting grumpy at the US borrowing money, and over its military and social spending, and the money printing, and not balancing its books. With China being the single largest holder of US debt, they are starting to make demands.

Don't worry, China has some nasty bubbles of their own, that will be busting sooner or later! Like the massive spending on large monsterous ghost cities! They also have huge military spending probably greater than the U.S. in that department!
« Last Edit: August 06, 2011, 10:02:06 AM by Baggins »
Well, ya, King's Quest is on Earth. Daventry is very old city from a long time ago. It's in ruins now and people aren't quite sure exactly where it used to be. There are some archaeologists searching through the ruins, they think they know its Daventry. But its somewhere on Earth."-Roberta Williams http://kingsquest.wikia.com/wiki/File:Daventryisearth.ogg

Offline glottal

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Re: US credit rating lowered by S&P.
« Reply #5 on: August 06, 2011, 05:18:42 PM »
Don't worry, China has some nasty bubbles of their own, that will be busting sooner or later! Like the massive spending on large monsterous ghost cities! They also have huge military spending probably greater than the U.S. in that department!

I heartily agree that the ghost city bubble in China ain't going to pop in a pretty way.  However, I question that their military spending is probably greater than in the U.S. (unless you count "internal security" - but if you count "internal security" for China, you also have to count it for the U.S. too - all of the spending on "homeland security", polices forces, etc).  The PLA does not have military bases all over the planet, and is not currently fighting 3 hot wars (oh whoops, I forgot, we haven't declared war on Libya).  While I don't trust the numbers that come out of Beijing any more than the credit rating agencies, I think the U.S. still probably spends a heck of a lot more on military than anyone else.  For now.

Offline Baggins

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Re: US credit rating lowered by S&P.
« Reply #6 on: August 07, 2011, 08:02:13 AM »
Quote
"(oh whoops, I forgot, we haven't declared war on Libya

Hah ya, right, just the politicians mincing words again!

Yes, US still edges out China  as the highest spending in the world. China is the second largest spender on military in the world. The US is not an efficient spender either! There is alot of beurocratic red tape, and the proverbial $10,000 hammer!

http://en.wikipedia.org/wiki/Military_budget_of_the_United_States

http://en.wikipedia.org/wiki/Military_budget_of_the_People's_Republic_of_China

China puts more of its military spending towards advancing their technology. China has many devices that would kick American's aging equipment to kingdom come now (and lack many of the ethical boundaries that we put in place to slow our own development of similar devices). Perhaps they know how to better spend, to get more bank for the bucks? Plus Bush sold many of secrets to them! Obama has sold some of our tech secrets to questionable allies as well (there both guilty of this). This has been used to create weapons to counteract our weapons!

Plus there are few social services spending in China, and limited human rights for the workers. They get paid pentance, live in hovels, and eat cheaply! It's very cheap to manufacture there, few regulations, and if you get hurt? Well the government probably will do little to help you! So its absolutely cheap to expand there military might there compared to the US.

God forbid we were ever forced into war with them... On the other hand, maybe we can convince some of the soldier to defect!

They also have plans to build another city/possible military base in Idaho! "Free economic zone". Fully china controlled, and hiring mainly chinese. Even its own private chinse run airport etc!

As the sun sets for the US, China really wants to push into that position as the latest and greatest empire! US, should have stayed out of the 'empire business' in the first place! But China isn't really a country I'd trust to be a kind and benovolent leader of the world :p. Especially considering the fact that they are demanding we get rid or limit our social services to save money (that's about as hypocritical demand as they come)!

If china keeps treating its people like it does, they'll be seeing a season of rebellion and civil war coming!

(Posted on: August 07, 2011, 02:26:42 AM)


http://hosted.ap.org/dynamic/stories/W/WORLD_MARKETS?SITE=RIPRJ&SECTION=HOME&TEMPLATE=DEFAULT

I guess it doesn't really matter how much the congress and current administration puts the blame on S&P, trying to highlight there tarnished reputation, when foreign countries trust S&P's word over the US (the us also has a tarnishe reputation in the world).

The downgrade has done it's damage and may cause even more damage in the coming weeks.
Well, ya, King's Quest is on Earth. Daventry is very old city from a long time ago. It's in ruins now and people aren't quite sure exactly where it used to be. There are some archaeologists searching through the ruins, they think they know its Daventry. But its somewhere on Earth."-Roberta Williams http://kingsquest.wikia.com/wiki/File:Daventryisearth.ogg