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United States loses AAA credit rating from S&P

reuters.com

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Re: United States loses AAA credit rating from S&P

#251

Post by cperciva »

philwelch wrote: post #181
cperciva wrote: post #170

Earlier quoted context omitted.

the US is obligated by treaty to defend Latvia, but by the same token Latvia is obligated by treaty to defend the US And, in fact, the only time that Article 5 of the NATO treaty -- the mutual self-defence article -- has been invoked was after 9/11, when the US used it to drag the rest of NATO into Afghanistan.

Not just into Afghanistan. A good chunk of the post-9/11 air patrols in North America were flown by allied aircraft.

Allied, yes -- but that was NORAD, not NATO.

Re: United States loses AAA credit rating from S&P

#253

Post by ImperatorLunae »

darksaga wrote: post #218
ImperatorLunae wrote: post #199

Earlier quoted context omitted.

you sure as hell don't tax people to create jobs vs military cuts ... sending a lot of people to the unemployment line. so, you don't tax people to sustain jobs, yet you don't cut jobs to lower spending. That is paradoxical.

First of all I fail to see how taxing people sustains jobs. As a business, if you're having to give more money to the government, and putting less of it back into your business, it would seem you're actually creating an incentive to lay people off as opposed to hiring more. It makes it harder to grow and hire more people if your business is taking in less money. I know it's obvious but. . . There are a million ways t…

First of all I fail to see how taxing people sustains jobs. You said it, "When you make military cuts, you're not just removing tanks and guns. You're also sending a lot of people to the unemployment line." So, to fund the military, you have to either sell bonds or levy taxes. Playing World Police for 60 years has been fun, but it's getting a little expensive.

I know it's obvious but... It's not obvious. What if those tax dollars were reinvested in universal health care? A small business wouldn't have to incur the cost of insuring its full-time employees. That would help stimulate growth, as it would cost less to hire each employee.

The premise that your argument stems from--lower taxes means more jobs--has been, time and time again, false in practice. Trickle-down economics are theoretically sound, but in 30 years of attempted trickle, nothing statistically significant has come down.

Re: United States loses AAA credit rating from S&P

#254

Post by giardini »

eps wrote: post #13

One thing to keep in mind is that many institutional investors, including those in Europe, are required to invest exclusively into triple-A instruments. This downgrade means a major sell-off of US bonds and whatnots currently held by such investors, and that could have an interesting avalanche effect.

You've got to be kidding.

Even as we speak the Euro is breaking apart. Europeans are pouring billions of dollars into U.S. currency, bonds and investments even at a loss, even after the S&P downgrade. Yesterday Bank Of New York Mellon told depositors that they would only accept investment if the investor accepted a _negative_ interest rate!

http://www.24hgold.com/english/news-gold-silver-bank-of-new-...

Why?

Because things are worse in Europe! The Greece financial crisis is ripping the Euro apart. The U.S. remains the best haven in a lousy neighborhood (the world): better than Europe, better than China, better than Asia.

We should obliterate S&P, Fitch and Moody's for their financial crimes during the financial meltdown. More trustworthy firms will rise to replace them. Meanwhile investors will become appropriately wary of investing in financial instruments about which they know nothing.

Re: United States loses AAA credit rating from S&P

#256

Post by ericd »

ramanujan wrote: post #203
ohyes wrote: post #171

Earlier quoted context omitted.

>It's a fact - you don't tax your way out of a recession and you sure as hell don't tax people to create jobs. It simply doesn't work. If it is a fact, where is the data? Economies are stimulated by people spending money. A tax cut to someone making 50,000 dollars a year is going to have a greater percentage of it spent than a tax cut to someone making 5,000,000 a year. Conversely, a 5-10% tax increase isn't going to…

You take the Keynesian view. It's difficult to discuss this in more than a soundbite, but the Hayekian view is well explained by these two videos: http://www.youtube.com/watch?v=d0nERTFo-Sk http://www.youtube.com/watch?v=GTQnarzmTOc Well worth watching if you haven't seen them. In short, the opposite/Hayekian view contends that taxation is seizure of resources from profitable/efficient entities and redistribution tow…

That's just completely divorced from reality. There are so many areas of the economy that could not reasonably be directly profitable on their own, but magnify the profit of the overall economy. Many of these things are funded by taxes.

Re: United States loses AAA credit rating from S&P

#257

Post by yaroslavvb »

bokonist wrote: post #174

Mindboggling. Does the S&P understand that the U.S. debt is all denominated in a currency that the U.S. government can print at will? If the U.S. government doesn't have an AAA rating, what does an AAA rating even mean? At the moment, the national "debt" is over $10 trillion dollars, while the total supply of currency is about $2 trillion, and total government profits are about negative $1.5 trillion. If we assume th…

Just because the government has the printing press doesn't mean it won't default. When China downgraded US ratings last week they said it's because "neither the Democratic Party nor Republican Party has shown any consideration for the general interest in order to argue for their own partisan interest; they had a hard time making the correct choice in a timely manner"

Re: United States loses AAA credit rating from S&P

#258

Post by T-hawk »

bokonist wrote: post #174

Mindboggling. Does the S&P understand that the U.S. debt is all denominated in a currency that the U.S. government can print at will? If the U.S. government doesn't have an AAA rating, what does an AAA rating even mean? At the moment, the national "debt" is over $10 trillion dollars, while the total supply of currency is about $2 trillion, and total government profits are about negative $1.5 trillion. If we assume th…

http://en.wikipedia.org/wiki/Fractional-reserve_banking

Fractional-reserve banking might be a good topic to review. It is entirely possible for more debt than currency to exist. Suppose you deposit $100 at a bank, which lends $80 of it to Alice. She deposits her $80 in another bank which lends $60 to Bob. So that's a perfectly legit scenario where more debt ($140) exists than currency ($100). And it doesn't mean that the debt can never be paid back.

> So you have two possibilities for the U.S. "debt" - AAA or F. Rating it anything else just demonstrates extraordinary ignorance.

Did you just call the entirety of Standard & Poor's, a leading financial firm for over 150 years, extraordinarily ignorant? What basis can you demonstrate that you understand the world and national economies and credit markets better than a few thousand really smart economists? There certainly does exist a spectrum between being the safest investment in the world and currently actually in default (which is what an F actually means.)

That said, it's true that S&P changing their rating doesn't have much concrete meaning. S&P didn't actually make the government any weaker than yesterday. Nobody knows what's going to happen next. S&P is guessing like the rest of us, although the guess is built on the strength of some very sophisticated financial models and analytical tools.

Re: United States loses AAA credit rating from S&P

#259

Post by uladzislau »

It's not just US the whole world economy system is screwed. Look what happens in Europe.

People should really make some radical improvements to the way economy and finance system work. The main things: it should be simplified and transparent.

If only a few experts understand what happens how could the system be reliable and secure? Everyone also knows that the more complicated is the system the higher is the failure rate.

Re: United States loses AAA credit rating from S&P

#260

Post by ericd »

winestock wrote: post #21
muyyatin wrote: post #17

Earlier quoted context omitted.

It would be interesting if they make a financial vehicle that turns US AA+ debt (along with something else) into AAA.

Damn you, but the boys at Goldman Sachs are probably on it, right now. Take a pile of T-bills. Siphon off the income from them into a pie. Cut the pie into tranches. The first tranch or two are guaranteed to be AAA. Just look at the math that the quants derived... We can all lipsync this tune.

Heh if only they could pretend that the performance of one T-Bill could be assumed to be uncorrelated to that of another T-Bill...
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