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Just the Facts: S&P's $2 Trillion Mistake

treasury.gov

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Re: Just the Facts: S&P's $2 Trillion Mistake

#211

Post by exit »

Bo102010 wrote: post #165
katovatzschyn wrote: post #126

From Naomi Klein's The Shock Doctrine: In February 1993, Canada was in the midst of financial catastrophe, or so one would have concluded by reading the newspapers and watching TV. “Debt Crisis Looms,” screamed a banner front-page headline in the national newspaper, the Globe and Mail. A major national television special reported that “economists are predicting that sometime in the next year, maybe two years, the dep…

Yikes. I refer you to Tyler Cowen's review of Klein: http://www.nysun.com/arts/shock-jock/63867/ Some highlights: "Ms. Klein's rhetoric is ridiculous. For instance, she attaches import to the fact that the word 'tank' appears in the label 'think tank.'" "What the reader will find is a series of fabricated claims, such as the suggestion that Margaret Thatcher created the Falkland Islands crisis to crush the unions." "…

where in the excerpt katovatzschyn provides is klein's rhetoric "ridiculous"?

which of the claims in the excerpt are fabricated?

which parts of the excerpt suffer from "shoddy reasoning"?

Re: Just the Facts: S&P's $2 Trillion Mistake

#212

Post by olefoo »

jamesaguilar wrote: post #163
mynegation wrote: post #157

Earlier quoted context omitted.

Please have my upvote (like you need one). I will definitely include "the shock doctrine" into my "To read" list. I wonder if there's an opportunity for "open source" credit ratings. Numbers like GDP, trade deficit or proficit, exchange rates, national debt etc are available and someone could creates a method that software or website could use to calculate all that into credit rating.

Bear in mind that there is a fair amount of criticism from many economists on the book's analysis. It may be worthwhile to include those on your reading list as well. Here are just a few: http://en.wikipedia.org/wiki/The_Shock_Doctrine#Criticism

Also remember that most economists are wrong. If you read any economist who cannot explain the works of John Maynard Keynes in lucid detail (regardless of whether they agree with him) you are dealing with someone who is an "authoritative fraud".

So pretty much the entire Chicago School.

Re: Just the Facts: S&P's $2 Trillion Mistake

#213

Post by exit »

andrewflnr wrote: post #11
hugh3 wrote: post #4

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.

Agreed. The real mistake made by all the rating agencies was in not downgrading the US years ago. And I say that as an American citizen who wants to be patriotic, but is just disgusted by the unrestrained spending in Washington. If the rating agencies had all had the courage to rock the boat and drop us a point a couple years ago, I think that the sound of money going away might have woken up even our political leade…

"wants to be patriotic"?

it's easy for me to skip over this part of your comment, but the more i think about it the more it bothers me that i have absolutely no clue what you mean by that.

i agree with the rest of your comment by the the way.

Re: Just the Facts: S&P's $2 Trillion Mistake

#214

Post by vacri »

Tsagadai wrote: post #191
Maascamp wrote: post #120

Earlier quoted context omitted.

Singapore's not quite the oasis you make it out to be. Have a look at how much it will cost you for a car once you get over there.

You really don't need a car to live in Singapore. Most of the time, driving will take you longer than getting on the metro. Remember that Singapore is an extremely small country and you can easily commute to anywhere on the island with a pushbike (even in the rain, most offices have showers). Renting or buying property is the expensive part of living in Singapore. However, it is quite inexpensive to get a live-in mai…

That being said, it's also a little unfair to use it as a standard reference point, given that it's a small city-state which also happens to be the best-placed trading port in the world. Singapore is an outlier - when you can take the cream off an inordinate amount of trade pouring past, you don't need as much income tax.

Re: Just the Facts: S&P's $2 Trillion Mistake

#215

Post by watchandwait »

Bungholio wrote: post #115

Bullet, meet foot. Given that this downgrade was triggered entirely by the poor behavior of U.S. politicians, how can it be in the U.S. interest for the Treasury to come across as whiney and paranoid? If the treasury had also mentioned the perfectly reasonable reasons for a downgrade there may be some balance, but to talk of S&P "making political decisions" puts them in exactly the same bracket as the poorly behaving…

The downgrade was triggered because America is borrowing 40 cents of every dollar of spending, for the third year in a row, with no sign of stopping.

Re: Just the Facts: S&P's $2 Trillion Mistake

#216

Post by fauigerzigerk »

benmmurphy wrote: post #205
fauigerzigerk wrote: post #50

S&P's mistake is certainly incredibly embarrassing but apart from that I'm asking myself a much more fundamental question: 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 likelyh…

regarding defaulting on nominal obligations: 1) sovereigns have defaulted in the past when they've had the option to monetize their obligations. often a sovereigns debt will be heavily owned by foreigners and it is a politically better option to fuck the foreigners. 2) a monetization of debt is equivalent to a partial default. if you bought a bunch of securities so you could cash them in 10 years to buy 20 hamburgers…

Don't you think that monetizing the debt is a form of unwillingness to pay?

Re: Just the Facts: S&P's $2 Trillion Mistake

#217

Post by fauigerzigerk »

InclinedPlane wrote: post #147
fauigerzigerk wrote: post #50

S&P's mistake is certainly incredibly embarrassing but apart from that I'm asking myself a much more fundamental question: 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 likelyh…

Being deep in debt is a big problem for a country but not the worst thing ever. With a fair amount of fiscal discipline it's usually possible to dig out of debt as long as it's not such a huge multiple of GDP. About the worse thing a country can do to deal with big debt is to print money as that will create an inflationary spiral which is harder to get out of than just debt. Indeed, runaway inflation can wreck the ec…

Yet the deepest and longest recession in history was a deflationary one.

Re: Just the Facts: S&P's $2 Trillion Mistake

#218

Post by inthewoods »

alnayyir wrote: post #117
lucisferre wrote: post #100

Earlier quoted context omitted.

Hate to just post a +1, me too, but this, it seems, just isn't be said or recognized enough. The US, with one of the lowest tax burdens in the western world ( the lowest?) can easily afford to pay down it's debts but without any support for raising taxes in the slightest, not just amongst republicans but from what it seems are a vocal and loud minority (majority?) of Americans, no one can really act surprised by S&P'…

Our tax burdens are not the lowest by any means. My total tax rate partially due to living in California (although it is mostly Federal) is ~40%. There are plenty of countries in Europe that would be happy to tax me less. My buddy in Singapore pays about 8% all told and he's in the same income range. The temptation to become an expat gets stronger as I earn more money. My sin is not being a fat cat living off capital…

I actually think the problem with perceptions of taxes in the US is not that we are taxed too much, but rather that many people feel they are taxed too much relative to the value they get from paying the taxes. If everyone had free, universal healthcare, I'd guess people would feel better about paying their taxes. The fact that a large portion goes to funding a largely unseen war machine doesn't help.

The other issue, of course, is that many people don't seem to realize that they benefit from the taxes they pay - a classic example being the tax credit for owning a home.

Re: Just the Facts: S&P's $2 Trillion Mistake

#219

Post by fauigerzigerk »

shahan wrote: post #209
fauigerzigerk wrote: post #197

Earlier quoted context omitted.

I'm not sure I understand your question correctly. There is definitely such a thing as a nominal obligation. When the treasury wants to borrow money, it conducts an auction to determine who gets to lend it how much at what interest rate. If, at the end of that auction, a particular lender agrees to lend the treasury USD 1bn for 10 years at a yield (interest rate) of 3%, you can calculate the exact nominal dollar amou…

Thanks for your answer. > I'm not sure what happens in terms of formal default if a borrower deliberately and aggressively inlfates away its debt faster than lenders can react by demanding higher interest rates at the next auction. This is the reason why I asked my question(s). Why would the borrower ever aggressively inflate away its debt, as opposed to gradually inflating it away? If there is no definite point of d…

*>Why would the borrower ever aggressively inflate away its debt, as opposed to gradually inflating it away?

Because if it happens gradually it doesn't work as lenders would demand gradually higher interest rates every time a debt tranche is rolled over.

I have looked up the terms of credit default swaps and it turns out that inflating debt away does not constitute formal default in the CDS market. Formal default (a so called credit event) only results from missing a payment or restructuring the terms of payment.

Re: Just the Facts: S&P's $2 Trillion Mistake

#220

Post by onemoreact »

CamperBob wrote: post #169
rayiner wrote: post #149

Earlier quoted context omitted.

Staggeringly poor article. Projecting out a trend line by effectively assuming sustained exponential growth is completely retarded. It's really the same as the projections predicting that the sustained 1990s bubble would continue and the US debt would be paid off by 2009.

Considering the demographics involved -- the population as a whole is getting older and health care for old people is expensive as all hell -- it seems the burden of proof is on you to demonstrate why sustained exponential growth in health-care costs will not take place.

The average lifespan in the US is decreasing.

The number of new drugs intering the market is decreasing, and once the patent expires on an existing drug most drugs effectivly become free.

Most importantly we spend twice as much of our GDP on heathcare as most contires with universal heathcare for reduced benifits. If the numbers keep getting worse the government can get involved in the supply side of the equation without reducing benifits to patents.

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