Congress and the President will pass the debt limit increase in time, but just barely. The US could still very likely lose it's triple A rating regardless based on the incredible disfunction of the government which will have huge consequences. The repercussions will effect more than just the US. Concerned or not?
Will The US Credit Rating Be Downgraded Anyway
- Thread starter Asterix
- Start date
It is a running joke that it has not been downgraded already. The AAA rating is supposed to mean an almost unimaginable chance of a default. Plainly that's just not the case, and therefore it is wrong that is currently listed as AAA. I think the rating agencies are just too chicken to ante up with the truth--but sooner or later they will have to reveal that the emperor has no clothes.
In fact, that the agencies continue with the farce that US treasuries are AAA really undermines any credibility that they have left, if they have any left after rating all those subprime CDO's as investment grade a few years back.
Now it may simply be because of POLITICS that there is a real chance of default, rather than ability to pay. But that doesn't matter, there's still a very real chance of a default so it's a 'B' at best if you're honest.
In fact, that the agencies continue with the farce that US treasuries are AAA really undermines any credibility that they have left, if they have any left after rating all those subprime CDO's as investment grade a few years back.
Now it may simply be because of POLITICS that there is a real chance of default, rather than ability to pay. But that doesn't matter, there's still a very real chance of a default so it's a 'B' at best if you're honest.
A opinion spot on this.... although the author is likely to draw some angst....
OTB
Dollar for Dollar
July 27, 2011 11:34 P.M.
By Mark Steyn
I agree with Andy. It’s not a dollar-for-dollar match if Obama gets an extra trillion bucks in his pocket now in return for 900-and-whatever billion stretched out over ten years. That formula’s a crock.
Furthermore, at some point the crock risks straining the ratings system beyond repair. Just as Obama and Boehner want credit for talking about cuts without having to cut anything, S&P and Moody’s want credit for musing on downgrading without actually having to do it. That’s understandable: downgrading the United States has consequences that downgrading Ireland and Portugal doesn’t. But, having flopped out in 2008, they want something on the record this time round.
I don’t think that will be enough. The European Union, you’ll recall, was fulminating against the ratings gang a couple of weeks back, and threatening to criminalize them. I regard the EU as a pestilence and have no use for the Euro, but their complaint is not without merit — as I noted in my weekend column. Nobody in Greece, Portugal, Spain, or Ireland is talking about “out years” and exciting plans for spending cuts in 2020. They’re getting on with it now — and they’re still being downgraded.
By contrast, both U.S. political parties are playing croquet on the lawn in August 1914 — and the ratings agencies are stringing along with them. Whatever the comparisons of debt-to-GDP ratios between Greece, Ireland, and the U.S., the actual hard dollar amount involved here is of an entirely different order. The Boehner plan tells us that real fiscal discipline is impossible within the U.S. political system. At some point, the ratings guys have to call them on it — or render their system meaningless.
OTB
Dollar for Dollar
July 27, 2011 11:34 P.M.
By Mark Steyn
I agree with Andy. It’s not a dollar-for-dollar match if Obama gets an extra trillion bucks in his pocket now in return for 900-and-whatever billion stretched out over ten years. That formula’s a crock.
Furthermore, at some point the crock risks straining the ratings system beyond repair. Just as Obama and Boehner want credit for talking about cuts without having to cut anything, S&P and Moody’s want credit for musing on downgrading without actually having to do it. That’s understandable: downgrading the United States has consequences that downgrading Ireland and Portugal doesn’t. But, having flopped out in 2008, they want something on the record this time round.
I don’t think that will be enough. The European Union, you’ll recall, was fulminating against the ratings gang a couple of weeks back, and threatening to criminalize them. I regard the EU as a pestilence and have no use for the Euro, but their complaint is not without merit — as I noted in my weekend column. Nobody in Greece, Portugal, Spain, or Ireland is talking about “out years” and exciting plans for spending cuts in 2020. They’re getting on with it now — and they’re still being downgraded.
By contrast, both U.S. political parties are playing croquet on the lawn in August 1914 — and the ratings agencies are stringing along with them. Whatever the comparisons of debt-to-GDP ratios between Greece, Ireland, and the U.S., the actual hard dollar amount involved here is of an entirely different order. The Boehner plan tells us that real fiscal discipline is impossible within the U.S. political system. At some point, the ratings guys have to call them on it — or render their system meaningless.
I hate to mention this but if the shit hits the fan, will some people start blaming the J's, starting with Goldman Sachs? Every downgrade needs a fallguy.
More blame WILL go to the GOP.
Wouldn't be surprised if the GOP is in cahoots here with Banksters who stand to rake in a bundle if this comes to pass. Banksters may even be telling/ordering GOPers to let it happen!...:eyebrows:
Terrance Corcoran in the National Post to-day said that President Obama is simply fearmongering. Terrance said August 2nd will come and go and life will continue as normal. However, it appears that the USA is no longer a triple A country.
If the US is downgraded it will interesting to watch the next Treasury auction see how the securities price..... I would think the large investors have very good information about US finances and that the rating by an agency is much less important. That said it will be an embarrassment.
OTB
OTB
The Treasury is going to have to hold an auction? Things are worse than I thought.
The air force will have to hold a helluvalot of bake sales to raise money for the F35 fighters.
My thinking of the way things would work without any political interference is similar to Fuji’s post. However, I’m not convinced that political considerations will not be taken into account and save the U.S. from a downgrade. I'm sure some political pressure will be put on the rating agencies. The truth is that I just don’t know how things will turn out but I would put at least a 50% change on the 7 who voted being right.
It was a joke. It just made me think that other things could be put on the block. I wonder what we could get for North Dakota?
Apparently the Republicans cant even vote on their own bill without drama. The vote is postponed until tomorrow
Last edited:
It is far from the first time (and that includes Democraticly controlled bodies).
The problem is the purests who refuse to compromise themselves even when faced with the choice of "not what I want" and "no good at all."
And predominantly, where do you think those "purest' currently reside, and under which mantle?
