41–50 of 242 posts
The claim about S&P changing their justification does not ring true. Their press release on Friday specifically mentioned the recent brinkmanship as a core concern.
I continue to be amazed at how much credibility we seem to give this (and other) rating agency after they rated subprime-backed derivatives as safe, rated AIG & Lehman as safe. Is our collective short-term memory non-existent?
Thing is though, the institutional investors who have policies of holding x% AAA debt can always change those rules. Because there's only so much AAA debt out there -- that's why it would be kinda bad for everybody if the US Gov't didn't carry ANY public debt.
Suppose you're a fund manager of a huge fund with $40bn under management. A full 1/4 is T-bills. Your mandate is to hold 1/4 of your fund in AAA debts. Well -- where do you put than 10 billion?
I can see many funds saying -- "look, the ratings agencies did their thing. But the world is no different today than it was yesterday."
This is especaially true because all these buyers of AA+ US Debt would stand to make a good bit more $$ than they would've before as the markets use these ratings agencies to justify increased yields.
But even that is not guaranteed because the debt is sold at auction. If there are enough buyers willing to buy at current yields, then sweet. And there may be because in this climate, if you're that fund manager, you desperately cling to safe havens like US public debit.
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But that is exactly why they downgraded us. Given everything you listed, we still were within days of default, thanks to how paralyzed the political process has become in Washington.
We were within days of the debt ceiling, not of default. Plenty of things could have been shuffled around to meet all debt payments (including some politically useful ones like stop sending SS checks, don't pay the troops, etc).
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But that is exactly why they downgraded us. Given everything you listed, we still were within days of default, thanks to how paralyzed the political process has become in Washington.
We were within days of the debt ceiling, not of default. Plenty of things could have been shuffled around to meet all debt payments (including some politically useful ones like stop sending SS checks, don't pay the troops, etc).
I hate it when students whine about the unfairness of their lousy grades and how they really deserved a higher one. It's even worse when the Treasury Department does it.
This would be like a student pointing out that the teacher incorrectly graded his paper; and after acknowledging that fact, the teacher maintains the same grade.
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but they are again refusing to face facts in front of them..its not unfunded health care liabilities..its UNFUNDED LIABILITIES in FED Budget that means anytime a law is passed without the means to pay for it..for example going to war in Iraq, etc without raising taxes to pay for it.. Another example taking over the Ed Loans from the private sector and than not raising some type of tax to pay for it. It should be that…
My preferred solution is this: 1. Every year, the US Government figures out how much money it wants to spend. 2. Then, it figures out what the (flat) tax rate would need to be in order to rustle up that much money. 3. Then, it sets the tax rate and sends everyone a bill. You could do this a year in advance just to make sure everybody knew how much they'd be getting taxed. But the important thing is that everybody in…
"Vast sums," LOL. Very telling you don't mention the drain on the economy by the military or by the financial industry itself.
Earlier quoted context omitted.
We were within days of the debt ceiling, not of default. Plenty of things could have been shuffled around to meet all debt payments (including some politically useful ones like stop sending SS checks, don't pay the troops, etc).
Doesn't the inability to pay even some of your debts, mean you're in default?
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He's a bit of a partisan, but in this case I think Krugman's analysis is basically correct, that real questions of debt sustainability aren't +/- $4trillion in the next 10 years, but longer-term insufficiently funded liabilities in healthcare and pensions: Krugman is a Democrat partisan, but complaining about unfunded liabilities in healthcare and pensions is exactly what the Republicans are doing too. If Krugman and…
Modern Monetary Theory reveals the entire premise of this issue to be false. The private sector does not fund the public sector in the way that most people believe. Non-convertible floating FX currency regimes (ie fiat money) such as the US,UK, and Japan can meet any and all financial obligations by issuing currency. Thus: 1) Taxes do not fund government. ( they 'back' the currency) 2) Treasury securities do not fund…
Issuing currency is identically equal to inflation, which is itself nothing more than a tax levied against those holding assets denominated in that currency. Using this option makes continued borrowing increasingly expensive, because those holding the debt wind up not getting repaid in actual value, only in nominal currency.
So when you look at the world from your perspective, the result is still that, long term, continually increasing deficit and debt is unsustainable.
Earlier quoted context omitted.
We were within days of the debt ceiling, not of default. Plenty of things could have been shuffled around to meet all debt payments (including some politically useful ones like stop sending SS checks, don't pay the troops, etc).
Doesn't the inability to pay even some of your debts, mean you're in default?
Why is the ability to pay considered at all when it comes to the US? A country that is indebted in its own currency can theoretically never default on its nominal obligations. Not due to inability to pay at least. I don't think that credit rating agencies even try to pass judgement on the likelyhood of governments inflating their debt away, so based on ability to pay the US credit rating should be fixed at AAA.
On the other hand, S&P clearly says that what they judge is the ability AND the willingness to pay. Considering the number of congressmen and women who recently voted in favor of default, the willingness to pay has to be in great doubt. In that light, I think, the US does not deserve a AAA or even a AA. B seems more appropriate.