U.S. loses AAA credit rating from S&P

Originally posted by shadowland8
reply to post by TiM3LoRd

 

Haha, I can't really recommend Australia to people currently. We've got a Carbon Tax coming in, plus, the people aren't exactly brilliant here and are more akin to people in London at 2AM.

as much as i hate the idea of a made up tax its the only way to keep the economy of the country moving forward. Unless you wants to end up like the good old US of A.

Some data people may be interested in

Percentage of Global Imports

• US - 15%
• EU - 15.6%
• China - 10.3%
• Japan - 5%

en.wikipedia.org...

The import figures are only approximate (Wikipedia has total global imports based on 2009 figures but individual country's imports on 2010 figures)

Percentage of Global Exports

• US - 8.5%
• EU - 12%
• China - 10.45%
• Japan - 5.1%

en.wikipedia.org...

Originally posted by TiM3LoRd
as much as i hate the idea of a made up tax its the only way to keep the economy of the country moving forward. Unless you wants to end up like the good old US of A.

No, it's not.

Stop reading Keynes and start reading Hayek and Rothbard.

Originally posted by TheOneElectric
Like I said in another thread:

This is the Tea Party's Scarlet Letter. They will wear it for the remainder of their days.

Whether or not you think they deserve it is one thing, but it is fact that they will be seen as wearing this badge of condemnation. They made their stand and there were consequences to be had. The ideology may suffer in the eyes of the world.

Surely their ideology will be played out across the nations of the world. Smaller governments, less government funding, privatisation of all public services. I thought this is what the Tea Party wanted? Though it may turn out to be less "The Waltons" and a bit more "Mad Max" for their liking.

The probability of this deficit cutting deal being just smoke and mirrors with no conviction is 100%.

An annual cut of $240 billion in govt. spending will cost at least 2 million jobs and the private sector is unlikely to absorb this. So, this deal is dead on arrival. They´re not gonna go through with it. It´s just about buying some more time. In a year the credit rating will probably be down to B.

Originally posted by woodwardjnr

Originally posted by TheOneElectric
Like I said in another thread:

This is the Tea Party's Scarlet Letter. They will wear it for the remainder of their days.

Whether or not you think they deserve it is one thing, but it is fact that they will be seen as wearing this badge of condemnation. They made their stand and there were consequences to be had. The ideology may suffer in the eyes of the world.

Surely their ideology will be played out across the nations of the world. Smaller governments, less government funding, privatisation of all public services. I thought this is what the Tea Party wanted? Though it may turn out to be less "The Waltons" and a bit more "Mad Max" for their liking.

Just as long as I don't have to get mohawk, I'd be fine with it.

Originally posted by burdman30ott6


Well, it's official now. I feel like Charlton Heston when he discovered the Planet of the Apes was actually Earth. The bastards in DC did it, they finally blew us up.

Monday's market is gonna be a brutal demonstration of why this country made a woefull series of terrible mistakes in leadership election over the past decade and why "We the People" will be the ultimate losers in the whole game.

news.yahoo.com
(visit the link for the full news article)

Agreed. The USA was brought to ruin by the cronyism of insane power hungry madmen. That said, once great nations CAN become great again. If only they were permitted the opportunity, to learn from history. Sadly, in this case, the intended and desired dumbing down process is all but complete.

Standard and Poor's... how ironic, even the pathetic name of the credit agency has the apparant fingerprints of the so-called "elite" written on it.

It was the crime of the century X 2 squared clusterf___.

What comes around goes around as they say. How unfortunate that this one has come home to roost on the heads and backs of the American people, while the likes of Dick Cheney review their ill begotten portfolio from the luxury of a private, gated and secure ranch in the heartland, a grimacing smile upon thier lizard lips.

Originally posted by woodwardjnr
Surely their ideology will be played out across the nations of the world. Smaller governments, less government funding, privatisation of all public services. I thought this is what the Tea Party wanted? Though it may turn out to be less "The Waltons" and a bit more "Mad Max" for their liking.

Mad Max is better than Idiocracy.

Originally posted by revs0lution
beginning of the end.. yes !

We should keep in mind that Standard & Poor is merely a private company headquartered in New York.

I greatly doubt that they downgraded the credit rating without extremely powerful political and/or financial interests support.

This downgrading wasn't prompted by the US's ability to repay it loans. It was prompted by some powerful group expecting to benefit from such a downgrade.

Who are they?

I'm not sure. It could be the Democrats, the Republicans, Wall Street or even the CIA.

Someone is pulling the strings, expecting to benefit. I'm just not sure who.

Well after reading all the last 11 pages I can only say. There we have it IMO that is the first shot of the coming economic war.

So many here, with a reaction that is understandable, are playing the blame game. Of course that is natural and to be expected. But it is not going to get us anywhere.

I found it most interesting that some of the people here that were laughing at the "gold bugs" as bubble minded. now seems to be eyeing it.

Funny how a dose of reality suddenly validates what a lot of us here has been saying for a long while now. Once you're outside of you normalcy bias, there's no going back. But in the end it makes you a stronger person.

OK. So the rating by S&P got dropped to AA (negative). What does this mean for the US and the world? That is going to be difficult to tell. The markets are based on fear and greed, we know that. But outside of the markets what is going to happen?

This was a massive vote of no confidence not only in the US Gov to be able to pay it's debts, but also in the value of the dollar. i.e. USD backed assets, namely bonds. metals / commodities

Suddenly those holding bonds are not so sure they are going to reach maturity. So is it better to cut and run now to a safe haven? This is a possibility. So the bond market is going to be one to watch come Sunday night / Monday morning. (remember it all starts in Japan)

With this, it means that there will be more dollars on the market. as people sell dollars to buy assets, or flips bonds to buy assets. (FEAR)

With all these extra billions of dollars that will be on the market, simple supply and demand.takes over. Lots of supply. little demand. This brings in inflation. prices rise as commodities based on USD accrue "value" (value is relative to the currency base) but in some quarters this will take time to trickle down to the street. But you may ee it quicker at the fuel pump. (GREED).

In order to try and curb inflation, usury interest on debt is raised (this will happen to the US Gov now anyway) in order to suck up all the excess dollars, and decrease supply.

The US Gov will have to pay more in order to meet interest payment on their debt, meaning their tax revenues will not go as far as they once did. So pet projects will (should) get shelved.

As for the banks that are already highly leveraged. this could break quite a number of them, as their interest on interbank loans, debt obligations, increases. (watch the LIBOR) which could lead to another crunch like we had in 2008 / 2009 between banks not trusting each other... again!

All it is going to mean is another squeeze on the purse strings of people and business. All completely orchestrated by the central bank system, who simply want to control everything, through centralization of the money supply.

So pay heed. They / we go it very wrong in 2008. And should have looked at Iceland. we have a second chance now to learn from them, and the Swedes. If all we get now is more money being printed then it's the end game I am afraid, and will only lead to civil unrest as prices spiral out of control.

Even today, i see a column in the print media, stating the obvious (to us) hopefully this will finally WAKE PEOPLE UP, as to what is happening to them and their children's future. pity this article was just 3 years to late. There is nothing like blind optimism.

This IMO is the event horizon! and it is a bloody big black hole.

If bonds sell off hard the FED could go belly up this month since it is leveraged 60-1 against its capital or actually even more if you consider that part of its bond portfolio is worthless mortgage crap that it took off the hands of banks. So, given this leverage, just a 2% loss on its portfolio obviously wipes out the FED´s capital and then some. As a result it would be forced to sell some of it´s govt. bonds (in effect reversing QE2) to banks and thus calling in part of the money supply. That´s the direct opposite of Bernanke throwing money from a helicopter. Very, very deflationary.

Originally posted by TheOneElectric
Like I said in another thread:

This is the Tea Party's Scarlet Letter. They will wear it for the remainder of their days.

Whether or not you think they deserve it is one thing, but it is fact that they will be seen as wearing this badge of condemnation. They made their stand and there were consequences to be had. The ideology may suffer in the eyes of the world.

What did S&P actually say?

* We have lowered our long-term sovereign credit rating on the United States of America to 'AA+' from 'AAA' and affirmed the 'A-1+' short-term rating.

* We have also removed both the short- and long-term ratings from CreditWatch negative.

* The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics.

* More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011.

* Since then, we have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government's debt dynamics any time soon.

* The outlook on the long-term rating is negative. We could lower the long-term rating to 'AA' within the next two years if we see that less reduction in spending than agreed to, higher interest rates, or new fiscal pressures during the period result in a higher general government debt trajectory than we currently assume in our base case.

www.standardandpoors.com...

reply to post by burdman30ott6


This may be ignorance of the US political system in my part but aren't the Republicans in charge of the US since they control Congress?

They were the ones that put this debt package in place not Obama.

reply to post by Krusty the Klown


IMO is it not a little pointless at this time to be trying to figure out "who is really to blame"

OK it might make people feel a little better if they can lynch someone. However would it not be better and smarter for people, all people, to now take a good long look at their own situation, especially those who have not made any preparation, to see what can be done in their part of the world, to makes the coming waves easier to handle?

That to me at least makes more sense than the mud slinging that has started and will no doubt continue.

reply to post by JakiusFogg


I was not mud slinging, merely replying to a question that the Mod posted.

As someone who lives on the other side of the planet as the US I am not au fait with every idiosyncrasy of the US political system.

I am merely trying to reduce my ignorance.

But thanks for pre-judging me.

reply to post by Krusty the Klown


Don't worry, I dont mean you specifically. and I certainly wasn't judging you. so don't' feel persecuted Just on the last 11 pages there is a lot of "its all Obama fault, no it GWB fault, not its the GOP or the Tea party" and it's a little pointless now, do you not agree?

When really its everyones fault in all the world not just the US.

But what I states above still remains true, we need to look at ourselves now.

Regarding the impending FED bankruptcy, well they were ahead of the curve and last January adopted a new accounting rule so that should any assets held by the Fed take a hit from higher interest rates, the value lost, instead of being deducted from the value of the asset base itself, it is recorded a new account called, "Liabilities of the U.S.Treasury". I´m not kidding. The worthless garbage they hold from banks and the soon to tumble govt. debt they hold isn´t really their problem. It´ll all be dumped on taxpayers.

See:

"The change essentially allows the Fed to denote losses by the various regional reserve banks that make up the Fed system as a liability to the Treasury rather than a hit to its capital. It would then simply direct future profits from Fed operations toward that liability. This enhances transparency (!!!) by providing clearer, more frequent, snapshots of the central bank's finances, analysts say. The bonus: the number can now turn negative without affecting the central bank's underlying financial condition.

"Any future losses the Fed may incur will now show up as a negative liability as opposed to a reduction in Fed capital, thereby making a negative capital situation technically impossible," said Brian Smedley, a rates strategist at Bank of America-Merrill Lynch and a former New York Fed staffer.

www.reuters.com...

Originally posted by Krusty the Klown
reply to post by burdman30ott6

 

This may be ignorance of the US political system in my part but aren't the Republicans in charge of the US since they control Congress?

The real problem is nobody is in charge of the US except for the corporate donors who buy and sell representative's votes (from both parties). From a legalese standpoint, the Democrats control the Senate and presidency, so they lead the GOP 2-1 in the DC power department. Further, Obama stated numerous times that he would veto the GOP plan that would have cut 4+ trillion off the debt over 10 years. Believe me, there's plenty of blame to go around the beltway.

This is an excellent example of the extremely high level of intelligence in the U.S. financial system:

"Any future losses the Fed may incur will now show up as a negative liability as opposed to a reduction in Fed capital, thereby making a negative capital situation technically impossible," said Brian Smedley, a rates strategist at Bank of America-Merrill Lynch and a former New York Fed staffer.