[Gunnair]

Quote:

By Charles Riley @CNNMoney August 5, 2011: 8:45 PM ET

NEW YORK (CNNMoney) -- Credit rating agency Standard & Poor's on Friday downgraded the credit rating of the United States, stripping the world's largest economy of its prized AAA status.

In July, S&P placed the United States' rating on "CreditWatch with negative implications" as the debt ceiling debate devolved into partisan bickering.

To avoid a downgrade, S&P said the United States needed to not only raise the debt ceiling, but also develop a "credible" plan to tackle the nation's long-term debt.

In its report Friday, S&P ruled that the U.S. fell short: "The downgrade reflects our opinion that the ... 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."

S&P also cited dysfunctional policymaking in Washington as a factor in the downgrade. "The effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges."

Rating agencies -- S&P, Moody's and Fitch -- analyze risk and give debt a "grade" that reflects the borrower's ability to pay the underlying loans.

The safest bets are stamped AAA. That's where U.S. debt has stood for years. Moody's first assigned the United States a AAA rating in 1917.

In the days after lawmakers managed to strike a debt-ceiling deal, the two other major rating agencies have both said the deficit reduction actions taken by Congress were a step in the right direction.

On Tuesday, Moody's said the United States will keep its sterling AAA credit rating, but lowered its outlook on U.S. debt to "negative."

Even if a downgrade were to occur, the United States will likely still be able to pay its bills for years to come and remains a good credit risk.

Investors have limited options for making safe investments, and Treasuries are effectively as liquid as cash. And other big countries have been downgraded and were still able to borrow at low rates.

At the same time, some experts warn that a downgrade could gum up the banking system and ripple out onto Main Street. Treasuries are used as collateral in many transactions between financial institutions and grease the skids of lending.

Consumers and investors could feel the impact of a downgrade. Interest rates on bonds could rise, and rates on mortgages and other types of loans along with them.

Government-backed agencies like Fannie Mae and Freddie Mac may also be downgraded. It's also possible that some state and local governments could also face a downgrade.

And investment decisions would become complicated for large institutional investors that are required to hold highly-rated securities.

First Published: August 5, 2011: 7:11 PM ET

http://money.cnn.com/2011/08/05/news/economy/downgrade_rumors/index.htm?iref=BN1&hpt=hp_t1

[ShepherdsDog]

The DOW goes DOH!!

[Psudo]

That's it. No one vote for any incumbent. Clear 'em all out.

[Lemmy]

No, no, no. This calamity hangs on ONE party. This clusterfuck is 100% on the GOP. Threatening to default. Madness. This issue alone SHOULD make every sane Republican out there to switch parties. Only a lunatic would support the GOP after this fiasco.

[Thanos]

And the direct and fraudulent role that outfits like S&P and Moody's were playing in the housing/mortgage debacle that set off the last three years of incessant financial crisis remains forgotten of course.

And not a single banker or financial wizard, including some of the ones at S&P, were ever in danger of going to prison for what they deliberately did? Moreso the unending pity.

LGF sets it straight as usual.

Quote:

From AAA to AA+. Regardless of what you think about S&P, this is a disgrace.

Maybe S&P are jumping the gun, maybe they’re making a political statement, but the fact is that the Tea Party right takes ALL the blame for this. S&P would not have even thought of taking such a step if the GOTP hadn’t turned this debt ceiling hike into a political nightmare.

This didn’t need to happen. During the George W. Bush presidency, Congress voted 7 times to raise the debt ceiling, with very little controversy. But with Obama in the White House, the Republican Congress held America’s credit rating hostage to push an extremist economic agenda.

And this is the result.

The Tea Party movement deserves a hearty congratulations tonight for forcing the first US credit downgrade in history. Well done.

[DanSC]

This would all hang on one party if the Democrats had decided to deal with it before last November, when they had all the votes they could ever want. Now it's just everyone's fault, and the historically low approval ratings for the U.S. Congress reflect that.

[martin14]

It's no surprise, but watch the ripples in the economy.

[Psudo]

Lemmy wrote:

Threatening to default. Madness. This issue alone SHOULD make every sane Republican out there to switch parties.

This again?

Some Democrats wouldn't give up spending. Tea Party Republicans wouldn't give up taxes. Both sides giving up their sacred cows would have been great, but either side giving up would have worked. Neither did. That's mutual failure, and an embarrassment for both sides. We shouldn't selectively protect our favorites, we should toss out the lot of 'em.

If you think I'm wrong, point out my error. I'm not actually disputing your criticism of the GOP, so you'll need to defend the Democrats to make me wrong.

LGF wrote:

This didn’t need to happen. During the George W. Bush presidency, Congress voted 7 times to raise the debt ceiling, with very little controversy.

Little Green Footballs is your sensible, moderate source? Clearly, the only possible rebuttal is Fox News:

DEBT CEILING INCREASES BY PRESIDENCY: (in billions)
Reagan: 17 increases totaling $1,865 - $110 each - $233 per year
H.W. Bush: 6 increases totaling $1,345 - $224 each - $336 per year
Clinton: 4 increases totaling $1,805 - $461 each - $234 per year
W. Bush: 7 increases totaling $5,365 - $766 each - $670 per year
Obama: 3 increases totaling $3,144 - $1,048 each - $1,347 per year

Obama is increasing the debt by a third more per increase, and twice as much per year, as Bush, who himself was twice as bad as any one of his predecessors. Yeah, it's different this time.

Edit in blue.

[Scape]

S&P is eating crow after this:

S&P’s Analysis Was Flawed by $2 Trillion Error, Treasury Says

If the international markets just shrug it will be S&P and not the US greenback losing valuable clout after this.

[xerxes]

That could just be the US trying to spin this. I think S&P's analysis is largely spot on. The political gridlock in the US will ensure nothing substantive will be done to aid the economic recovery and there's no indication that it will improve substantively in the next few years.

[martin14]

Scape wrote:

S&P is eating crow after this:

S&P’s Analysis Was Flawed by $2 Trillion Error, Treasury Says

If the international markets just shrug it will be S&P and not the US greenback losing valuable clout after this.

The writing is on the wall, if S&P forgot to carry the one, it wont make
a difference to the reality.

And anyway, the first print is what people remember, not the retraction on page 6.

[GreenTiger]

S&P is an as impressed with the way Congress's behaved during this as the rest of us are and that is why the credit rating is lowered.

[Bruce_the_vii]

PM David Cameron in the UK was facing a deficit of 10% of GDP, higher than the USA's 9% and he has a formula for austerity. It's 3:1 cuts to tax increases. This is pretty heavy on the cuts. His Liberal Democratic Party coalition Partners are on board. Something like this may have to be done in the USA. It means cuts to Social Security and Medicare. Tough stuff. The Republicans are talking 83:17. The problem is the reduction in aggregate demand will slow growth,which they are also counting on. Any way Cameron is taking action. If he pulls it off he'll be a national hero.

[GreenTiger]

Psudo wrote:

That's it. No one vote for any incumbent. Clear 'em all out.

Probably the best idea yet, keep Gabrielle Giffords, she is a gutsy principled lady outside of that replace all the incumbents.

[Psudo]

Bruce_the_vii wrote:

PM David Cameron in the UK was facing a deficit of 10% of GDP, higher than the USA's 9% and he has a formula for austerity. It's 3:1 cuts to tax increases. This is pretty heavy on the cuts. His Liberal Democratic Party coalition Partners are on board. Something like this may have to be done in the USA. It means cuts to Social Security and Medicare.

Gee, why does that sound familiar?

GreenTiger wrote:

keep Gabrielle Giffords

Okay, yeah, I'll concede that one. She wasn't responsible for any of this. Everyone else has to go.