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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

#111

Post by winestock »

prostoalex wrote: post #98
geuis wrote: post #52

(Reference: http://www.federalbudget.com/ ) Steps to recovery: 1) End all offensive military actions overseas. Finish winding down Iraq and abandon Afghanistan wholesale. These actions have cost several trillion dollars over the last 10 years. We can't get that money back, but we can stop spending more. 2) Defense spending is in the top 3 highest budget expenditures. Cut it by 1 third across the board. Maintain impor…

What constitutes defense spending nowadays? Is it largely salary payments to current troops? Wouldn't we have to deal with a large unemployment problem in case we laid off a bunch of military employees and told them to go find a job somewhere else? Or is it payment to defense contractors, such as Valley's own Lockheed Martin? Wouldn't this cause a large number of people to be unemployed, contributing to recession?

That is an excellent question. I'm too lazy to search for the answer, but, with our luck, I'd say that the Defense budget is about evenly split betwixt personnel and hardware. Therefore, cuts to defense spending will cause unemployment for both defense contractor engineers as well as veteran grunts.

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

#112

Post by BrentRitterbeck »

mbreese wrote: post #59
TomOfTTB wrote: post #55

Earlier quoted context omitted.

Again this is based on the same logic that people will treat the U.S. Government the same way they'd treat any other person and that's just not going to happen. If the U.S. falls back into recession we'll take everyone with us. Other countries know this. Banks know this. Institutional Investors know this. Increase the interest rate on the U.S. and you'll trigger an increase on the U.S. consumer while exacerbating the…

Some institutions are obligated (by charter or contract) to only buy AAA rated bonds. That's why it's a big deal... Now that being said, I have no idea how this would work in practice.

Now that being said, I have no idea how this would work in practice.

That's the problem. No one else knows either. Monday is not going to be a good day.

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

#113

Post by spdy »

TomOfTTB wrote: post #61
mbreese wrote: post #59

Earlier quoted context omitted.

Some institutions are obligated (by charter or contract) to only buy AAA rated bonds. That's why it's a big deal... Now that being said, I have no idea how this would work in practice.

I'm sorry but that's bull. Anything can be changed. Contracts can be revised and even charters can be updated by a Board of Directors. If you hold a significant amount of U.S. Bonds you aren't going to ditch them on S&P's say so. You're going to call a meeting of the Board of Directors or Trustees or whoever and decide based on your own judgement. The whole point of a rating agency is to provide you with research tha…

There is a lot of hope in your post. Investors will just move money to another country and there are enough who have much better grow rates. (China / India). Or entities who will bet on the downfall of the U.S and there will be countries who have a high interest in this.

On Monday you can short every major company the downfall will be significant. This will be very interesting to watch the next world recession is on our doorsteps.

Money does not care who you are or what you do.

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

#114

Post by adaml_623 »

cantbecool wrote: post #5

I wonder what would have happened if S&P dropped the rating during the trading day, and not after the markets closed. We probably would have seen another -500 point drop on the DJI.

Or perhaps the drop happened because a lot of the big banks knew that the downgrade was coming. Is it insider trading if everyone knows?

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

#115

Post by abalone »

geuis wrote: post #52

(Reference: http://www.federalbudget.com/ ) Steps to recovery: 1) End all offensive military actions overseas. Finish winding down Iraq and abandon Afghanistan wholesale. These actions have cost several trillion dollars over the last 10 years. We can't get that money back, but we can stop spending more. 2) Defense spending is in the top 3 highest budget expenditures. Cut it by 1 third across the board. Maintain impor…

The only reason the healthcare issue seems so complicated is the massive amount of propaganda we're subjected to in the U.S. media about it. You're on the right track to figuring out an answer. Just look at what all the other industrialized countries do. Then do that.

Nice little overview: http://en.wikipedia.org/wiki/Universal_health_care

This is of course beyond the pale of rational discussion in U.S. political discourse. Just whisper "socialism" and it's off the table, instantly.

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

#116

Post by veyron »

_delirium wrote: post #103
veyron wrote: post #93

Earlier quoted context omitted.

Some funds strictly cannot hold anything lower than AAA, but most have "investment grade" requirement which is BBB (Baa in moody's ratings) That type of downgrade is very unlikely

The only ones I can find that are strictly AAA are either all-corporate to begin with, or explicitly say that they invest in "AAA-rated U.S. Treasury and agency securities" or similar language. Which is awkward if there is no such thing, but it's not clear it'd require them to sell off, since there's nothing eligible to move to.

Checked on BB. It looks like $80B of invested assets across bond funds with any reported information would be affected (which is paltry, considering the full run of US treasuries far exceeds $10T)

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

#117

Post by watchandwait »

fanboy123 wrote: post #4

from the press release: "The political brinksmanship of recent months highlights what we see as America's governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed. "

There has been a complete lack of leadership from the Congressional Democrats on this issue. They haven't produced a budget plan in nearly three years, while borrowing 40 cents of every dollar spent during that time.

I'm not a partisan-- George Bush's runaway spending contributed a great deal to the current predicament. But the basic Congressional oversight and operating under a budget hasn't happened the last couple of years.

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

#118

Post by pyoung »

miked wrote: post #27
fleitz wrote: post #12

I wonder if the downgrade is because the US might be unwilling to pay its debts or because they feel the people may be unwilling to bailout the banks again?

The downgrade is because the US Gov is spending far more than it's taking in. In other words, it's for the same reason that every other person / business / government gets downgraded. It's important to realize that there's no magic here.

You cannot compare 'person' and 'business' with government. The government has the ability to print money, whereas the other two do not. The only reason they don't print money to pay off all their debts is because it will result in massive inflation.

The reason the European debt crises is so serious is because the adoption of the euro means that no individual contry can print their own money to avoid default.

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

#119

Post by olalonde »

prostoalex wrote: post #98
geuis wrote: post #52

(Reference: http://www.federalbudget.com/ ) Steps to recovery: 1) End all offensive military actions overseas. Finish winding down Iraq and abandon Afghanistan wholesale. These actions have cost several trillion dollars over the last 10 years. We can't get that money back, but we can stop spending more. 2) Defense spending is in the top 3 highest budget expenditures. Cut it by 1 third across the board. Maintain impor…

What constitutes defense spending nowadays? Is it largely salary payments to current troops? Wouldn't we have to deal with a large unemployment problem in case we laid off a bunch of military employees and told them to go find a job somewhere else? Or is it payment to defense contractors, such as Valley's own Lockheed Martin? Wouldn't this cause a large number of people to be unemployed, contributing to recession?

Theoretically, this problem can easily be solved: keep sending them paychecks. At least, they could be working on something productive like finding jobs or starting businesses.

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

#120

Post by ams6110 »

jrockway wrote: post #83
usaar333 wrote: post #70

Earlier quoted context omitted.

I doubt it will be that significant. Japan has been at AA- from all rating agencies forever (and has vastly higher debt) and pays lower rates than the US. Besides, as you pointed out there are so few large countries with AAA from all agencies. Besides, there's no new information released today, other than what some analysts at S&P think.

Exactly. The big banks do their own research, so what S&P thinks is largely irrelevant. We have an entire division devoted only to US treasuries.

Beyond that, I'm not sure why any of these agencies has any real credibility anymore, since they were giving AAA ratings to the "toxic" CDOs up until they collapsed.
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