EPTS&P Downgrades US Credit - Page 18
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Pimpmuckl
Germany528 Posts
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ShadeR
Australia7535 Posts
On August 07 2011 03:24 RvB wrote: The stock markets have existed since the 17th century... It's never one thing that goes wrong in these kind of crisis there are a lot of causes and it's certainly not as simple as to just outlaw a whole system... Yeah derivatives and CDO's are sketchy as hell tho. what with those investment banks paying off the rating agencys to continually rate subprime loans at AAA. | ||
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EnderSword
Canada669 Posts
I've got 2 points on this situation though, 1st, I think people should be aware of the real 'Stalling' game that goes on, because this happens in Politics all the time. Everything has this form: Party A and Party B disagree on something. That thing X has a deadline after which something bad will happen if no agreement is reached. Party A takes an unreasonable position against thing X Party B takes an unreasonable position in favour of thing X Both parties intentionally make their position hard for the other side to agree to. Both parties then appeal to the public, claiming they are willing to negotiate, but that it is the other party being unreasonable. Both sides claim the other side is holding everyone hostage because of the deadline. As the deadline approaches, the side who was able to convince the majority of the public that the crisis was the other side's fault, wins. Both parties have basically forced each other to stall, while convincing people only one side is forcing it. The more major the public support for one side of the debate, the more stubborn the winning side can be and the more unreasonable the agreement will be in that side's favour. This formula basically is followed for Politics, Unions, Player's Associations, Religious Groups, between Nations etc... The key the public needs to eventually realize is despite any appearance otherwise, BOTH sides are always responsible, because at any point one side could just concede and agree with the other. Because of this, the 'deadline' will never be hit unless both sides actually WANT it to be hit. My 2nd point however, The lowering of the US credit Rating, is neither a reflection on this actual situation occurring, nor is it actually anything of any particular concern. The Credit Agencies would never give any consideration to the idea that the US could have 'missed the deadline' because there is simply no universe in which that would have been allowed to occur. A Military coup of the nation would happen before the United States was allowed to actually default on payments...it was never going to happen no matter what. The downgrade of rating is formulaic, based on total debt loads and the reliabilities of future revenues. Downgrading to AA reflects the possibility that long term revenues may not keep pace with future borrowing. The reason this does not overly matter is because....everyone knew this already. Despite being the 'risk free vehicle' everyone has always incorporated their own risk element to holding US Treasuries when calculating the risk levels of their portfolios. That risk has never actually been 'Zero'. As the situation changed over the past few years, the implied risk in US securities has risen already. The change in credit rating won't change the reality...it merely reflects the reality that is already taken into account by investment firms throughout the world. Americans will never elect anyone who plans to spend less money in reality, so eventually this is going to hit a wall...but it likely won't be for quite some time. EDIT: The average salary of finance people I just graduated an MBA program with, will be higher than the majority of national politicians in my country. The problem is not these guys being Overpaid...It's them being paid so Low that no one in their right mind would give up their financial or legal practice making millions a year to take a job paying like $150k/year....so you get crazy/stupid people instead. | ||
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peidongyang
Canada2084 Posts
too bad for USA | ||
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TofuFox
374 Posts
On August 07 2011 02:27 VGhost wrote: Points on this chart. The first two links - as you admit - don't address the actual effect of the tax cuts, just saying that revenue increased after them, not that the tax cuts caused the revenue increase. The $1.4 trillion is from CBO estimates, I think. There is a bit of an analysis here saying they reduced revenues regardless of supply side effects, but it doesn't go into too much detail. 3) It seems to me almost impossible to reconcile the two charts in the original article. The first gives projected deficits for the Obama administration, every one of which is greater than any Bush deficit, and the first two of which have already come up short of actual deficits. Yet somehow the second chart manages to suggest that the Obama administration will only add about 1/3 of what Bush did? (Honestly that seems so weird that I'd appreciate an explanation, as I'm convinced I'm missing something there. Even "biased reporting", not that I suspect that here, wouldn't leave a gaping hole like that.) 1) The economy. It tanked, and revenues tanked along with it. (This is the biggest factor in the size of the current deficit). So with less money coming in, the gap between the spending an the income grew. 2) Obama is also adding to the deficit the continuation of Bush policies (taxes, defense spending, Medicare Part D). He's just adding much less new stuff. 4) One way or another, if Bush's policies led us into big holes, one of Obama's responsibilities should have been to get us out - like he campaigned for, among other things, pulling out of Iraq and Afghanistan, neither of which (unless I've missed it, and it would have been huge news) have happened yet. So at least part of the blame for continued Middle East war costs falls on the Obama administration's shoulders at this point (and the entirety of the Libya thing). I entirely agree with that. We're on timetables to get out of both, but we're still there. On August 07 2011 02:07 turdburgler wrote: the thing that i find... so strange, about all of this is that america, with one of the smallest public service sectors in the developed world is talking about budget cuts as much as tax rises. and yet the countries with the biggest public sectors dont have debt problems  american politics seems so far removed from the european model that its hard for some one like me to even comprehend the things half the US politicians are even saying. its just that crazy/stupid In terms of cost-efficiency, our healthcare system sucks. On steroids. American spends similar amounts of public money per person in relation to GDP as other countries (and much more money overall), despite not having single-payer. Combine that with somewhat lower revenues ... | ||
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Craze
United States561 Posts
On August 07 2011 04:01 EnderSword wrote: A Military coup of the nation would happen before the United States was allowed to actually default on payments...it was never going to happen no matter what. This statement kills your credibility. Even though your entire first comment is true and makes perfect sense, this coup would never happen. Our country places so much faith in the electoral process the only way that would ever happen is through an upheaval of it (president refusing to step down) | ||
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Romantic
United States1844 Posts
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EnderSword
Canada669 Posts
On August 07 2011 04:36 Craze wrote: This statement kills your credibility. Even though your entire first comment is true and makes perfect sense, this coup would never happen. Our country places so much faith in the electoral process the only way that would ever happen is through an upheaval of it (president refusing to step down) While it was meant as a 'last possible option' - there are certainly dozens of things that would prevent a default before this ever occurred (The most likely being the President would simply raise the cap with executive authority) I don't know if people in fact realize the seriousness of what would truly occur if the US seriously DID default of its debt. As such, while incredibly, incredibly unlikely....I do stand by the statement that the US is more likely to fall into a civil war than it is to not pay out its Treasury bills. You vastly over-estimate the power of the people or 'faith' in something or other (Which is baffling given your 2000 election in which this was basically disregarded already)...Not paying that debt would likely lead to a war and the financial collapse of the world. Essentially imagine a situation where the West Coast US was invaded...but the President just kept saying 'No' and refusing to agree to mobilize the army to defend the country. Eventually it would just mobilize itself. It would be the same situation here...there is no possible case in which that debt would not be payed by some method. Essentially you took the most dramatic and 'for illustration purposes only' statement, and then commented on it and nothing else. | ||
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Chaosvuistje
Netherlands2581 Posts
I hope you guys dont get an absolutely terrible monday, although it wont be pretty regardless. | ||
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Derez
Netherlands6068 Posts
On August 07 2011 04:48 EnderSword wrote: While it was meant as a 'last possible option' - there are certainly dozens of things that would prevent a default before this ever occurred (The most likely being the President would simply raise the cap with executive authority) I don't know if people in fact realize the seriousness of what would truly occur if the US seriously DID default of its debt. As such, while incredibly, incredibly unlikely....I do stand by the statement that the US is more likely to fall into a civil war than it is to not pay out its Treasury bills. You vastly over-estimate the power of the people or 'faith' in something or other (Which is baffling given your 2000 election in which this was basically disregarded already)...Not paying that debt would likely lead to a war and the financial collapse of the world. Essentially imagine a situation where the West Coast US was invaded...but the President just kept saying 'No' and refusing to agree to mobilize the army to defend the country. Eventually it would just mobilize itself. It would be the same situation here...there is no possible case in which that debt would not be payed by some method. Essentially you took the most dramatic and 'for illustration purposes only' statement, and then commented on it and nothing else. The US defaulting on a bunch of loans that were due just after august the 2nd was a very real possibility, and yes, that would have had terrible consequences. Obviously the loans would be paid back in full in the end, but even defaulting for only a couple of days would have been a big deal. That's the point of it tho, and that's what S&P are saying (partially) with their downrating: The US political system is fucked up to such an extent that we don't think they'll be able to come up with a reasonable economic solution. Essentially what happened in the US is that by being unable to agree (in a timely, decent fashion) on a way to reduce the deficit, they've increased the debt even more. When the next round of refinancing the loans comes up (and they do all the time), the US won't get the same low interest rates they were enjoying before. If US politicians had simply passed a clean debt bill straight away, and continued these pointless shouting matches on the sideline anyhow, the entire country (democrat or republican) would have been better off. | ||
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EnderSword
Canada669 Posts
On August 07 2011 04:41 Romantic wrote: It must be a political downgrade. The USA is nowhere close to having trouble making interest payments. Unless they are being completely stupid, Standard & Poors must have made the decision based on the fact the US political system is screwed up beyond recognition. Well, you can actually look at the report. S&P US Report They don't just like say 'We're downgrading it...LOL!' they kinda write papers about it. The reasons cited were that the agreement did not allow enough of a debt cap raise to meet medium term obligations, and that The US Debe to GDP levels were 2nd highest in their Peer group and Rising, while their peer's levels were dropping. Criteria You can also look at the above criteria for a rating of Public Sovereign debt. It's all actually written pretty much in layman's terms and quite readable. Look stuff up and read before coming up with random theories and conspiracies. Odds are the changing of a financial rating...has some mathematical or financial justification. | ||
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EnderSword
Canada669 Posts
On August 07 2011 05:03 Derez wrote: The US defaulting on a bunch of loans that were due just after august the 2nd was a very real possibility, and yes, that would have had terrible consequences. Obviously the loans would be paid back in full in the end, but even defaulting for only a couple of days would have been a big deal. The 2nd was never actually a deadline, it was simply the payment date...but that payment could be made from cash the government had. The 2nd was used as kind of the 'public' deadline for arguments and so forth, because the real deadline...August 8th....really no one was willing to screw around with. They used the 2nd because that's the date they had to begin to use funds otherwise bookmarked to pay the treasuries. The 8th to the 10th is when they would have like actually ran out of money and actually defaulted. People were really pushing that Aug 2nd date though, presumably because no one would want to actually screw around with the real date, its a bit too serious. | ||
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Derez
Netherlands6068 Posts
On August 07 2011 05:12 EnderSword wrote: Well, you can actually look at the report. S&P US Report They don't just like say 'We're downgrading it...LOL!' they kinda write papers about it. The reasons cited were that the agreement did not allow enough of a debt cap raise to meet medium term obligations, and that The US Debe to GDP levels were 2nd highest in their Peer group and Rising, while their peer's levels were dropping. Criteria You can also look at the above criteria for a rating of Public Sovereign debt. It's all actually written pretty much in layman's terms and quite readable. Look stuff up and read before coming up with random theories and conspiracies. Odds are the changing of a financial rating...has some mathematical or financial justification. Just to have the overview posted here (emphasis mine): Overview • 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 thelong-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. | ||
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VPCursed
1044 Posts
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yandere991
Australia394 Posts
On August 07 2011 02:37 Holy_AT wrote: In my honest opinion the whole stock market should be outlawed. This system with stocks has nothing todo with the real market, it is a hinderance to the real market and people working in this sector are useless parasites sucking of from the real industry and market. This whole rating shit is just horrible and nothing more then throwing dice and betting and has nothing todo with the actual market. Without the stock market good luck getting economic growth past what was happening in the feudal eras. Young fledging companies with massive potential would nearly find it impossible to finance themselves through borrowings alone in opposed to a injection of funds through an IPO. Basically we would be left with an small economy comprised of purely private or government firms. Think of the stock market as part of the engine that actually forces firms to grow at a speed that would be noticeable. Whether you enjoy a world without the stock market is probably tied to if you would enjoy living in the 19th century. On topic though the whole thing is purely psychological and apart from the initial fallout probably long term changes would be few. There are few to no alternatives to the US market in terms of liquidity and historical depths in using treasury bonds and bills to do stuff. | ||
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BordZ
Australia118 Posts
On August 07 2011 04:01 EnderSword wrote: EDIT: The average salary of finance people I just graduated an MBA program with, will be higher than the majority of national politicians in my country. The problem is not these guys being Overpaid...It's them being paid so Low that no one in their right mind would give up their financial or legal practice making millions a year to take a job paying like $150k/year....so you get crazy/stupid people instead. being paid more the 150k for not contributing anything productive to society is a travesty in itself to be completely honest. | ||
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EnderSword
Canada669 Posts
On August 07 2011 14:59 BordZ wrote: being paid more the 150k for not contributing anything productive to society is a travesty in itself to be completely honest. Ya...but isn't that just kinda something dumb guys think its funny to say? If your Senators were good at their jobs...wouldn't they be worth Millions? If a Good Senator could pass a plan making the military 1% more efficient...he's saved you Billions of dollars. If a Good Congressman pushes for one more little thing to be covered in a Healthcare bill, he could help 10,000 people. If a really good President chose the advice of General A over General B...he could save you Billions, save lives and shorten a war by months or years. You're used to bad politicians because you don't Pay them hardly anything, and you elect ones that lie to you the best. If the President got $1 Billion a year, was allowed to have a Harem of women and he got to keep Air Force One at the end, you'd have the smartest god damn man in the country as President and you wouldn't even know who George Bush or Barack Obama were. | ||
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Serthius
Samoa226 Posts
Obviously, the US economy has problems, but this is a political downgrade. The tea party politicians have proved themselves more than willing to play Russian roulette with the country's economy, and it is now becoming apparent to the rest of the world that there are actually politicians in the US that would like to see it default on its debt, and that those politicians actually have a lot of influence. Hopefully this will be something of a wake up call, but my guess is the tea party extremists will find a way to pin the blame for this on Obama, then he loses the election in 2012 only to be replaced by a tea party backed republican who drives the country down an even steeper slope. | ||
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EnderSword
Canada669 Posts
On August 07 2011 19:02 Serthius wrote: Downgrading the credit rating of a country which only has debts in its own currency makes no sense. Uh...why? If I hold American debt, to be paid in American Dollars...I need to be confident not only that you'll pay me back, but that the thing you pay me with with be worth something. That's specifically one of the 5 criteria used to issue a Bond Rating...the stability of your currency's value and Money Supply. Also, if you think those Tea Party people were even going to let the thing default, you're on crack. I know everyone was acting like they had 'hours to go' but they had about 6 days left. Higher spending is just as responsible for this rating cut as a lower debt ceiling is. | ||
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N3rV[Green]
United States1935 Posts
On August 07 2011 03:44 Pimpmuckl wrote: It is very very interesting how Taxes get handled in America. In Germany for example we have Taxrates up to 45% (at around 100.000e a year), now there is a recent discussion about lifting these numbers to 49%. So this is quite a bit more than you guys have and now i do not get it at ALL why the republicans (and Tea Party?) completely block anything related to higher taxes. They do it cause they want their money for themselves. They earned it, it's theirs. Stupid government always trying to take money from stupidly rich people to help the poor, suffering, and needy in the world. The rich tea party people need that money to go on vactions, and buy giant boats that they drive to a LAKE to go putting around in the water ONCE a YEAR. I seriously seriously hate people with money in this country for the most part. Let's just put a flat take on the top 4 wealthiest people in the Nation, 50%. They'll still make billions of dollars, just not as many billions. | ||
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