[CNBC] S&P contacts White House to notify about a downgrade coming

US lectured by China

 

You know what? I don't ****ing care.

 

Standard and Poor's rated over 16,907 securities triple AAA from 2000
till 2008.

Microsoft
ADP
Exxon
Johnson and Johnson

are the only AAA rated American companies.

Creditibility check please!

But this does adversely affect us because many silly institutions and
investment policy statements of pension plans etc. are linked to ratings.
Therefore the yield may rise and thereby our borrowing costs.

The market of course says otherwise when US treasury yields are lower than those of Canada, France and other nations that are higher rated.

 

Do you buy large amount of US bonds? If pension funds and countries like China don't care, then we are good for right now. If the investors decide not to buy as much US bonds as before, we are screwed, or we have to raise interest rates, with every 1% raise of interest costing US around 150 billion dollars in interest a year. How much were we planning to cut the deficit a year? Only 250 billion a year.

 

i don't think its that big of a deal. are investors gonna demand higher rates because they think their us treasuries will default?

 

Guess we will find out soon enough.

 

Saudi stock market first to plunge on S&P downgrade

Saudi Arabia's stock market dropped 5.46pc on Saturday as it became the first exchange to react to the historic US credit downgrade.

http://www.telegraph.co.uk/finance/...arket-first-to-plunge-on-SandP-downgrade.html

 

No surprise for an economy dominated by oil, which is priced in dollars in global trade. The S&P downgrade likely means US interest rates go up, which means the dollar strengthens, which means oil prices are lower, which means Saudi companies' future profits are weakened. Of all the major exchanges, I'd expect this one to react the strongest to the downgrade.

 

Don't read much do you?

 

As long as oue economy is tangled with China's, they'll continue to pay our bills.

 

Float your currency first b-tches.

 

For what? So they could get more toilet paper for actual goods?

I'm not making any predictions, but there's a HUGE difference between the US and Japan. For starters, 90% of the public debt in Japan is domestically held under their tatami mattresses. That's basically the primary reason that I can think of that the BoJ (to say the least of the Japanese government) is continuing down their idiotic rabbit-hole of not at least partially defaulting already. It will kill the political party that does it.

In the case of the US, that's not the case. There exist significant foreign holders, not the least of which was the recent flight to "quality," quality of which just got downgraded.

On a general note though, I find some of the comments here funny. Can anyone here think of a reason why the US shouldn't have been downgraded? John Chambers from S&P said his company rates sovereigns through 5 criteria: political, economic, trade, fiscal and monetary. Rate it yourself, does the US deserve the highest credit rating.

Treasury, not so much, but if you think about, the US government had defaulted on its obligations (timely payment) since what, May 16, when Tim Geithner started shifting money, by not paying the states for example?

What else I find funny is the shallacking S&P is getting (many of which, deserved). I see comments like the expected "they didn't see Lehman, etc." Except here's the problem. The messenger is irrelevant. Bob the serial rapist would still be right that Joe raped Suzy if Joe in fact, raped Suzy.

Of course, claiming that S&P is irrelevant would imply that you could have done better. Did you? Well, congratulations that no one lost money after Lehman.

The response out of Washington is all too typical too (and far from original). The Europeans already threatened to take away the rating powers of S&P, Fitch and Moody's when they put various EU sovereigns on downgrade watch. I kinda figured it was only a matter of time it happened here.

And can somebody in Congress please tell me what this $2 trillion accounting error is? AS ALWAYS, the rating agencies give governments 12 hours to dispute their ratings prior to publication. S&P afforded Congress that right. Seems to me like they couldn't sufficiently explain away that error.

 

I would argue 2 things:

1. S&P said a $4 trillion deal would have been enough, but $2.5T isn't. Is that REALLY the defining factor? Wouldn't the specifics of the cuts be more important (for example, do they change the course we're on)? If so, why wouldn't you simply wait 3 months until the specifics of the cut are determined?

2. The S&P is supposed to determine likelihood of default. The US can monetize its debt anytime it wants through inflation. And it just demonstrated that even in the most ridiculous partisan atmosphere, it won't allow a debt default. So how did the chance of default increase today vs 2 months ago?

What are you referring to here? The S&P admitted they made the error - and then said a few hours later that they didn't care. However long they gave them, it wasn't anywhere close to 12 hours.

http://www.cnbc.com/id/44043459

What is not at issue is that sometime in the early afternoon Friday, S&P informed the US Treasury that its committee had decided to downgrade US sovereign debt. Ratings agencies typically inform issuers of their decision before a press release is issued. But US officials quickly noticed an error in the agency’s calculations. This resulted in a change in the projected debt to GDP ratio. Instead of the 87 percent in 2021 miscalculated by S&P, it should have been 79 percent, a roughly $2 trillion mistake.

Neither side disputes the error.

But there are different versions of how long S&P then took after learning of its mistake to reconsider its downgrade. One source familiar with thinking inside the government says officials were stunned when S&P returned just an hour or two later and told them they were going ahead with the downgrade despite the mistake. The source says this suggested the agency was committed to the downgrade regardless of the data. The source adds that the new data showed the US achieving a sustainable deficit in the ten-year window.

Yet, a person familiar with the thinking in S&P said the agency took considerably more time and carefully considered the new information. It went to great lengths to convene its entire committee and consider the matter. This person says the conclusion was the same: while the rate of the growth in debt slowed and was lower than first calculated, it never stopped growing and became sustainable, the criteria by which S&P had said last month it would judge the US. It had said it was looking for $4 trillion of cuts but the debt ceiling deal produced only about $2.7 trillion

 

Are you ****ing kidding me?

W and his spending got us into this mess......as someone that is not liberal, nor conservative, at least be honest.

This is mostly W's mess that Obama inherited.

Nothing more to say.

DD

 

LMAO. Obama has done nothing to help the situation, but instead has fanned the flames and made things worse. He sounds like a broken record still trying to cling to his "I inherited this" excuse.

 

LOL - what would he have done Texx? He inherited a crap economy, a government mired in debt, that just gave away BILLIONS to companies to stimulate it..and instead the companies compacted.

Then you have the Tea Party morons who want to cut spending, oh..but not defense spending...which is the area most in need of cuts.

There is no ****ing common sense here...none....on either side of the aisle....

DD

 

Why would you have to? They're not predicting the future of the US economy here. People always to two things. On one hand they over-simplify the issue. On the other hand they over-complicate the issue. This is one of those over-complicate the issue things here. The bottom line is, here are your revenue (projected of course), here are your spendings. Are they balanced? If not then how often will it take to run out of money and default on the debt, with of course, the usual money-printing, open-market operations, economics-led revenue increases, etc built in already.

That's it. No more, no less. I personally would love to hear how they came up with the $4 trillion number (sad to say, I've been too lazy to read the report), which is a very good question; but if you take that number as true, then what they cut or don't cut that doesn't reach that number is irrelevant.

A couple of reasons. First of all, as I've already mentioned, though the US has not defaulted on its Treasuries, it is TECHNICALLY IN DEFAULT on some of its obligations since May 16. I personally would think that yes, the credit of the borrower is materially relevant to the quality of its bonds.

But let's use John Chambers' S&P criteria here. I would say that at a minimum, there is a fairly substantial political (to say the least) and economic risk. I would also say that there's also a pretty significant fiscal and monetary risk. In light of that, would you state that the US has the highest credit quality?

As for the 2 months thing, I'll put it this way. 2 weeks ago the old man sent me one of the papers/assessments/whatever he just published where he stated that the US faces immediate downgrade. If not, he stated that the biggest ratings agencies would face an even bigger credibility gap than they do now. And I'll be honest here. I didn't think they'll be downgraded. Or more precisely, I knew they'll be downgraded, I just didn't think it will be this soon due to, you guessed, the threat of removing them from NRSRO.

I don't know if you've noticed, the ratings agencies have been much more responsive, especially when it comes to the European crisis recently. That idiotic Carl Levin as well as Tom Coburn even said as much, with Levin following up with the additional jab that whether they are just trying to make up for their "lack of competence" during the financial crisis, as if that mattered.

But that's kinda the point too. It was a long time coming and it was only a matter of time. What changed between 3 months ago and now? Not much. But we've definitely demonstrated that the political circus in Washington is worse than we thought and we've likely underestimated the political risks.

As your own article stated, "a person familiar with S&P" said that it took significant time to review the information and determined it didn't matter.

As for the timelines, S&P notified the US Treasury sometime around "early Friday afternoon. It DID NOT issue a press release for the downgrade. It issued a press release after midnight which sounds to me like its very close to 12 hours.

 

When is the last time he mentioned inheriting this? Something tells me you're the broken record.

 

LMAO his cronies were pumping out this message as recent as last Sunday.

http://www.politico.com/blogs/politicolive/0711/Sperling_Obama_inherited_a_bad_economy.html

PWNED