It looks like you're using an Ad Blocker.

Please white-list or disable AboveTopSecret.com in your ad-blocking tool.

Thank you.

 

Some features of ATS will be disabled while you continue to use an ad-blocker.

 

Who benifits from a US credit downgrade? The rich, of course.

page: 1
5

log in

join
share:

posted on May, 31 2012 @ 08:41 PM
link   
The Republicans are at it again; threatening to bring the country to its knees over the debt ceiling issue unless their demands for "austerity" are met. The last time they forced a showdown, the credit rating agencies downgraded the US credit rating from AAA to AA+. Who knows how they may react if no long-term solutions come about over the latest showdown? It may seem like a high risk tactic just before election season and one has to wonder who really stands to gain over another showdown over the debt ceiling.

The last time it happened, Niel Cavuto of Fox news crowed that this could be a good thing for the US.

"I would welcome a downgrade. I think that will be the pain that will wake people up," Cavuto said during a one-on-one interview with Fox commentator John Stossel.


A credit downgrade would make it more difficult for the government to borrow money and force them to pay a higher interest rate on their bonds which could make payments on the debt skyrocket. It seems like a no-win situation for everybody but, there is one group that will make out like bandits; the rich (of course
).

The rich are heavily invested in government bonds and will see the value of those bonds increase in the event of another credit rating downgrade. Who doesn't think they weren't happy with the results of the last downgrade and that they're salivating at the possibility of another?




Another downgrade could also benefit big business by making corporate debt more attractive to investors .


The Benefits of a Downgrade

Conversely, an action such as this downgrade that hits the value of U.S. Treasuries — though, given that the Euro debt is the only real alternative, it won’t affect the value that much — may channel more investment into U.S. corporate debt. This could in turn help fund the business expansion and job creation the economy so desperately needs.

The AAA rating for U.S. and other government securities has given sovereign debt an advantage over private debt. Given the profligate behavior of many of the world’s governments, this advantage was often undeserved. A more honest reflection of the risks of investing in the debt of the U.S. and other governments means a more even playing field for entrepreneurs to raise capital. And that is never a bad thing.

National Review Online

So a downgrade in the US credit rating, while having a devastating effect on the average man in America, could mean putting more money into fat cat bond investors pockets while making it easier for the big corporations to borrow money to expand their operations (most likely in an off-shore direction).

It would also give the Republicans the excuse that need to finally slash all those pesky social safety nets that have complained about for ages. They just might think its worth it to risk an election to achieve their goals of further enriching their benefactors and gutting the social safety net system of this country.




posted on May, 31 2012 @ 08:42 PM
link   
reply to post by FortAnthem
 


Yea no #. The republicans are baby killars so lets condemn them to death! Yeah



posted on May, 31 2012 @ 08:47 PM
link   
Don't count on Obama to stop them.




posted on May, 31 2012 @ 09:42 PM
link   
reply to post by FortAnthem
 





posted on May, 31 2012 @ 09:53 PM
link   
Why any non-millionaire republican like the Koch brothers is beyond me. They do not care about you or the USA, they care about their power and bank account.


edit on 31-5-2012 by RealSpoke because: (no reason given)



posted on May, 31 2012 @ 10:12 PM
link   
Any republican that is obsessed with the debt ceiling and cheering it to collapse should read this article by Paul Craig Roberts. He was part of the Reagan admin and co-founded Reaganomics.




This brings us to the most important aspect of the debt ceiling “crisis” that the Republicans are ignoring.

If Republicans become obsessed with their agenda and refuse a reasonable deal, and the Democrats do not cave, the executive branch will be faced with an inability to continue its operations. This could mean, for example, that the troops in the various wars could not be supplied or paid, that air traffic controllers could not be paid, that the US government could not roll over the debt that comes due or issue the new debt that pays for 43% of federal budget expenditures. A shutdown today would be different in its reach from the Newt Gingrich government shutdown in the 1990s. Then the federal government got by with shutting down "nonessential government.” A shutdown today would require halting 43% of federal expenditures. If we were to include the wars, nonessential spending might actually total 43% of expenditures. But, of course, Republicans don't want to include the wars with nonessential spending.

The US dollar could plummet in exchange value and lose its role as world reserve currency. The US would no longer be able to pay its oil bill in its own currency, and as its balance of payments is heavily in the red, the US has no foreign currencies with which to pay its oil import bill. Or its manufactured goods import bill, or any other bill.

We are talking about a crisis beyond anything the world has ever seen. Does anyone think that President Obama is going to just sit there while the power of the US collapses? He doesn’t have to do so. There are presidential directives and executive orders in place, put there by George W. Bush himself, that President Obama can invoke to declare a national emergency, suspend the debt ceiling limit, and continue to issue Treasury debt. This is exactly what would happen.

The consequences would be that the power of the purse would transfer from Congress to the President. It would be the end of the power of Congress. Congress, Republicans and Democrats alike, have already given away to the President Congress’ Constitutional right to decide whether the country goes to war. Now Congress would lose its power over debt, taxes, and the budget itself.

Republicans need to decide whether the advantage of delivering a blow against “leechdom” is worth such extreme risks.



globalresearch.ca...



posted on Jun, 1 2012 @ 12:59 AM
link   
reply to post by FortAnthem
 




A credit downgrade would make it more difficult for the government to borrow money and force them to pay a higher interest rate on their bonds which could make payments on the debt skyrocket. It seems like a no-win situation for everybody but, there is one group that will make out like bandits; the rich (of course
).

The rich are heavily invested in government bonds and will see the value of those bonds increase in the event of another credit rating downgrade. Who doesn't think they weren't happy with the results of the last downgrade and that they're salivating at the possibility of another?



If someone owns some U.S. Treasury notes or bonds (at the fixed rate at time of purchase), and the interest rate goes up later on new issues, how would that person make extra money on those existing notes or bonds ?

Wouldn't the value of the bond actually be worth less if sold early before maturity ?

Somebody would need to pay less on the principal in order to get more "interest" at maturity.....right ?
 






So a downgrade in the US credit rating, while having a devastating effect on the average man in America, could mean putting more money into fat cat bond investors pockets while making it easier for the big corporations to borrow money to expand their operations (most likely in an off-shore direction).


Yes a company could possibly sell more notes at a higher rate, but wouldn't they have to pay more interest back ?

I think companies issue notes at higher rates anyway sometimes.

They would need to be careful ...... right ?
 



Many fatties got a nice guaranteed high interest rate in the late 1970's when 30 year bond rates were going above 10%.



posted on Jun, 1 2012 @ 01:06 AM
link   
Well considering the Federal Reserve sets all the interest rates in the country and the credit being downgraded just means it will be harder to sell them and people won't make as much as well as a diminished profit.

The rich don't benefit no one really does with exception of the Federal Reserve.
edit on 1-6-2012 by neo96 because: (no reason given)



posted on Jun, 1 2012 @ 01:09 AM
link   

Originally posted by RealSpoke
Why any non-millionaire republican like the Koch brothers is beyond me. They do not care about you or the USA, they care about their power and bank account.


edit on 31-5-2012 by RealSpoke because: (no reason given)


Just shut up and vote for obama again ya racist. K



posted on Jun, 1 2012 @ 07:45 AM
link   

Originally posted by xuenchen

If someone owns some U.S. Treasury notes or bonds (at the fixed rate at time of purchase), and the interest rate goes up later on new issues, how would that person make extra money on those existing notes or bonds ?

Wouldn't the value of the bond actually be worth less if sold early before maturity ?

Somebody would need to pay less on the principal in order to get more "interest" at maturity.....right ?



I was wondering about that one myself. It appears that, they would lose value as the rates go up.


Bond prices move inversely to interest rates. When interest rates go up, bond prices go down and when interest rates go down, bond prices go up. Remember, we’re talking about previously issued bonds trading on the open market.
The inverse relationship is easy to see with this simple illustration.

A bond is issued for $10,000 for five years with a 5% coupon or interest rate, paid every six months. Then interest rates rise to 6%.

If you want to sell this bond, who would buy it when it is paying 1% below market rates (5% vs. 6%)? You have to sweeten the deal so the buyer gets a market rate for the bond.

You can’t change the interest rate on the bond. That’s fixed at 5%. You can, however change the price you will take for the bond.

The annual payment of $500 ($10,000 x 5%) must equal a 6% payment. Doing the math, you discover that the face value of the bond must be discounted to $8,333 so that the $500 fixed payment equals a 6% yield on the buyer’s investment ($8,333 x 6% = $500).

If interest rates went down instead of up, you could then sell your bond at a premium over face value because the fixed interest rate would be higher than the market rate.

About.com

The rich, or the corporations at least, would still benifit as investors fled unstable gubment bonds and invested more money into corporate stocks. I don't know how much of a benifit that would really be though in the event of a catastrphically failing economy.



posted on Jun, 1 2012 @ 08:44 AM
link   

Originally posted by HamrHeed

Originally posted by RealSpoke
Why any non-millionaire republican like the Koch brothers is beyond me. They do not care about you or the USA, they care about their power and bank account.

Just shut up and vote for obama again ya racist. K


I don't see anything racist in RealSpoke's comment whatsoever.
Where in left field are you coming from?
 


Back to OP, I believe after reading all these posts, the rich are always the beneficiaries.
I never see them struggle, nor will I. This system is setup to benefit the rich.
Not the middle class, as we are being systematically devalued...everyday.
(the poor only benefit when the gov't spreads the wealth)

Interest rates aside, if you can laugh about the system imploding its either:
A: You have no money to worry about.
Or
B: You will make money from it.

When you look around at the gigantic scheme being pulled in the financial market today, you see the actual "bubble" being inflated moreso than any other "bubble" in recent years. The last crisis to have advantageous benefits is actually the only one left. The financial market (bubble).

It's relatively plain to see especially when all these corporations are slowly underfunding their pension plans for 401k's. They want everyone to invest in the largest bubble being created.

So that when it crashes, it will take the entire system down with it.
All the stored numerical wealth will dissappear as fast as it was created.
This market can't be propped up (bailed out).... It IS the last market.

The future is extremely uncertain and it's starting to show.








top topics



 
5

log in

join