S&P Rating Furor - A Different Perspective

www.standardandpoors.com... atings/sovereigns/ratings-list/en/us?sectorName=null&subSectorCode=39&filter=Z

We have heard about how China has chastised our government for allowing the Standard and Poor Rating to be devalued from AAA status to AA+. The devaluation has been part of the world wide fluctuations in the markets, and the bad dreams of investors.

I happened to wonder, where our rating drop put us in relation to the other rated countries of the world, so I went to the S&P web site that you can find in the link. What I found out, has made me even more curious.

Standard & Poor rates 126 Sovereign states. The United States was one of 19 Sovereigns rated at AAA prior to the downgrade. With the change, 18 Sovereign states maintain their AAA rating currently.

Those states are:
Austria, Australia, Canada, Denmark, France, Finland, Guernsey, Germany, Hong Kong, Isle of Man, Luxembourg, Liechtenstein, Norway, New Zealand, Netherlands, Swiss Confederation, Sweden and the United Kingdom.

The United States is presently tied at second place with Belgium with our AA+ rating.

Does anyone notice the obvious omission?

China, who has so resoundingly chastised us, is rated below us with a AA- rating.

Now, I realize that I am not well informed on the workings of the ratings systems, the markets and the interest rates and such, but this doesn't sit well with me. Can someone with a good understanding of the system, please put it into perspective for me and any others who see this as off kilter? I know China holds the majority of our debt, I know the devaluation of the dollar allows other currencies to flourish, and I know that the devaluation will wreak havoc with interest rates.

We all know what our politicians put forward as the mandatory reasons for raising the debt ceiling so the downgrade wouldn't happen. That was done, in ridiculous fashion, in my opinion. S&P downgraded us anyway, which from what I read, was valid. How does this REALLY affect the economy of the US, politics aside please, if possible. And, does China have a valid complaint in this situation?

S&P don't have a great track record. They were dishing out AAA ratings to dodgy sub prime mortgage providers.

"I find it interesting to see S&P so vigilant today in downgrading the U.S. credit rating. Where were they four years ago when they, and other credit rating agencies, helped cause this horrendous recession by providing AAA ratings to worthless sub-prime mortgage securities on behalf of Wall Street investment firms? Where were they last December when Congress and the White House drove up the national debt by $700 billion by extending Bush's tax breaks for the rich?"

sanders.senate.gov...

reply to post by BearTruth


Another country screaming is Russia who also happens to not be on the list. I would suppose the reason China is upset is their 1.5 trillion dollars they are holding in US debt. If it is invested in the AAA Treasury Bonds they may be forced to sell which would csause them a loss. Another aspect is that TPTB made a deal with China in the 1970's and promised to make them the superpower of the world if China would give concessions. Maybe they are feeling a little nervous about the promises given.

reply to post by woodwardjnr


I am beginning to believe that the whole system is a sham. When entire economies can be leveled at the stroke of a pen, there is something wrong. The economy is not fiat currency.

reply to post by redrose123


I would have to say, if I was the government of China, I would be nervous. The United States is not the only country in economic turmoil. Could their vociferous complaints have something to do with the "Squeaky Wheel" syndrome?

finance.yahoo.com... f-685948715.html?x=0

Here is another tasty tidbit from the S&P:

Standard & Poor's says it downgraded the U.S. government's credit rating because it believes the U.S. will keep having problems getting its finances under control.

and

But S&P said it was the months of haggling in Congress over budget cuts that led it to downgrade the U.S. rating. The ratings agency was dissatisfied with the deal lawmakers reached last weekend. And it isn't confident that the government will do much better in the future, even as the U.S. budget deficit grows.

It appears that the S&P has no confidence in our recovery. This could be the beginning of our very own "Austerity" measures such as those proposed in Greece and other nations. We know how those are going over.

S&P's opinion doesn't matter at all.

Everyone knows that U.S debt is far below the required standards for a triple A rating.

S&P is probably working with the govt on this.

reply to post by Rockdisjoint


Thank You, Rockdisjoint, another piece of the puzzle. Your thread made some points that lend credence to the possible collusion. To what end, I am not sure, but, it appears that our government was well aware of what their shenanigans would result in.

reply to post by woodwardjnr


The entire ratings business is fife with conflict of interest and corruption.

They supposedly use a totally quantitative approach to determining debt quality, its what they are the most proud of, yet in the down grade they used primarily subjective criteria, i.e. Washington gridlock as the prime driver.

Interesting what politicians these folks give their spiff to (and thus get spiff in return). Low to high

John Edwards (D)
Jim Esch (D-NE)
John Morris (R-IL)
John McCain (R-AZ)
Mary L Landrieu (D-LA)
Kirsten Gillibrand (D-NY)
Rudolph W Giuliani (R)
Hillary Clinton (D-NY)
John Kerry (D-MA)
Barack Obama (D)

I'm guessing that S&P have a bit of a vested interest in pushing for the "balanced approach" since they are padding those folks driving that model.

Not a fan of intrusive government, but there is a regulatory role for a global body that rates soverign debt. A corporation should not be given this much power, period.