China Rating Agency Downgrades US Debt

[thewiseguy]

China's Dagong Global has cut the credit rating on U.S. sovereign debt to A from A+, Chen Jialin, general manager of the international department at the firm told CNBC on Wednesday. The agency has also put the U.S. on negative outlook.

The decision came despite the U.S. raising the debt ceiling and averting a default, and even as both Fitch and Moody's re-affirmed the U.S.'s Triple-A rating.

An A rating puts the U.S. five notches below Triple-A and at the same level as Russia.

Explaining its decision Dagong said the debt deal had not changed the general trend in which the increase in debt outpaced the increase in GDP and tax revenue.

http://www.cnbc.com/id/43996450

Bottom line, S&P is not alone. The U.S. debt surpassed the GDP this week. Feel free to attack S&P and their credibility, but I honestly do not believe that U.S. deserves a AAA credit rating.

If anything Moody's and Fitch's decisions to keep the rating at AAA were perhaps motivated and influenced by the Wall Street.

[lonestarnot]

So what.

[nadinbrzezinski]

1. And this is not about the debt

S&P was quite clear in their statement. They do not believe the Tax bush cuts are going away (raise your hands if you agree)... and they see our political system as unstable.

[Ruby the Liberal]

2. This this this.

That 10% of the country could hold us hostage over ideology and our leaders are willing to do a 180 on their stand to accomodate them does not signify confidence.

[flamingdem]

4. PS I left you data, 900 billion is correct

[tsuki]

6. I think the unstable political system may scare them more than the Bush tax cuts.

[nadinbrzezinski]

21. I think you are right

this was shot across bow, to be exact. Will do zero to raise interest rates, but the shitstorm on twitter is funny already.

[Oasis_]

7. Not really

There was unanimous agreement today at work after reviewing the preliminary data that a downgrade would occur due to the lack of any appetite for another round of stimulus present, as opposed to merely rescinding the tax cuts due to expire at the very end of 2012.

Global austerity nearly guarantees failure, as the markets desperately need an injection of government capital. Minus that---well, we're talking about a double dip whose equivalent mirrors '37

[nadinbrzezinski]

9. Here, from their statement, black and white

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.

http://www.standardandpoors.com/ratings/articles/en/us/?assetID=1245316529563

[Oasis_]

19. OK

Believe me, I analyze the same data for a living. Their concern isn't with generating additional revenue (per se) as long as the period (in this case 10 year estimates) produce the desired estimated results.

You're being extraordinarily disingenuous when you state that they unequivocally demand raising marginal rates to accomplish the aforementioned.

We could simply hike yearly projected growth rates to skew the numbers and satisfy them in the interim. It would totally backfire, but any combination of cuts and revenue really doesn't matter. The end projected result (as long as the scenario isn't SO transparently rosy) is acceptable.

They understand they're dealing with the United States. That in itself scores a ton of points.

Oasis

[nadinbrzezinski]

20. Disengenous by giving you the exact words used

Ok... that is amazing.

[JDPriestly]

29. The real question is our lagging growth rate.

And the "privatization" binge of the Obama and state administrations -- privatizing prisons, schools and everything possible so that those traditionally governmental functions can be credited to our private sectors -- does not resolve the underlying issue: we have exported our industrial base and outsourced far too many white-collar jobs.

Our exaggerated faith in "free trade" has caused us to simply relinquish our production capacity to countries with cheaper labor (China) or a greater focus on research and development (for example, Germany).

We need to cut back on free trade. We should have reciprocal trade agreements that really permit each country that is partner to a trade agreement with us to sell an equal dollar value of goods to us that it buys from us.

Alternatively, we should go back to the time of tariffs -- not excessively high ones -- but tariffs that insure that our domestic industry can compete at least within the US markets.

And above all, we should drastically cut military spending.

Our overly expensive military expansionism is going to fall apart on us in a very devastating way if we don't simply slowly rein it in.

We are making a lot of mistakes that France made prior to the French Revolution. It too over-committed resources to military exploits including the American Revolution. And it did not tax its wealthy class enough. In addition, the wealthy in France increasingly sat around gambling -- at tables not at computers. But still, excessive and strategically unnecessary military spending plus low taxes on the rich plus a lot of gambling -- France made all those mistakes and look what happened to them.

[Oasis_]

23. Did you see this?

Do you have any understanding as to the meaning?

Standard & Poor's also said that the
outlook on the long-term rating is negative. At the same time, Standard &
Poor's affirmed its 'A-1+' short-term rating on the U.S

[Oasis_]

25. OR

"We lowered our long-term rating on the U.S. because we believe that the
prolonged controversy over raising the statutory debt ceiling and the related
fiscal policy debate indicate that further near-term progress containing the
growth in public spending, especially on entitlements, or on reaching an
agreement on raising revenues is less likely than we previously assumed and
will remain a contentious and fitful process. We also believe that the fiscal
consolidation plan that Congress and the Administration agreed to this week
falls short of the amount that we believe is necessary to stabilize the"




OR--the key word is "or" in that paragraph. THEY DO NOT CARE what particular avenue is employed to achieve it.

[Capn Sunshine]

28. here's their exact quote from their press release

Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act.

The blame for this is squarely on the republicans

[flamingdem]

3. Read the editorial about how someone placed a billion dollar bet on a downgrade

This is about making a buck, we're dealing with pirates here and a degree of insider trading

[nadinbrzezinski]

5. You believe the bush tax cuts are going away?

They don't either.

[flamingdem]

8. I think S&P is very dirty politically, they want 4 trillion in cuts

and don't give a damn about jobs, maintaining the big 3 or democracy.

They are pirates and republicans, that's enough to let me know all
they are doing is more of the same.

Plus, just take a look at how the republicans are using this such
as Mittens blaming it on Obama, it's all the same game, they were
discredited during the melt down as well.

The Bush tax cuts ... well I don't know, I can see them getting around
it by getting into a flat tax, but they can't keep on with this status
quo, good thing about the debt debate, average Joe now is tuned in and
more pissed than ever about inequality, so say the polls.

[nadinbrzezinski]

10. Here is their statement

http://www.standardandpoors.com/ratings/articles/en/us/?assetID=1245316529563

And it is pretty black and white... instability of the political system

And yes they are dirty... I would not say republican, but definitely rw.. but their statement is not one that should give anybody who understands wonkiness any ease.

[indurancevile]

12. bs

[nadinbrzezinski]

14. Did you read it?

By the way downgrades tend to send stock exchanges down too.

[flamingdem]

13. Their statement is cover so they don't look partisan nt

[nadinbrzezinski]

15. Actually no, their statment follows a long line

of such statements for places like Mexico, Argentina, and Bulgaria... as well as Turkey. et al.

Perhaps in this case having a global view of this helps.

[flamingdem]

17. I think Robert Reich analyzed it pretty well nt

[nadinbrzezinski]

18. And in this he is having a case of cognitive dissonance

this could never happen in the US... strikes me as that.

By the way, the guilty party for this is the GOP in general (with some of the dems) and the TParty in particular.

[JDPriestly]

30. No doubt true, flamingdem. I had the same thought but no evidence to

support it. Although it makes a lot of sense.

[indurancevile]

11. oh bs.

“Is Standard and Poor’s Manipulating US Debt Rating to Escape Liability for the Mortgage Crisis?”

This rumbling has been coming from Capitol Hill for a while, which made us start asking questions about what was really going on with Standard and Poors. It felt like there’s a story-behind-the-story driving S&P’s actions in the debt ceiling debate, which appear inexplicable at face value and go way beyond what Moody’s or Fitch have done. And the more we looked at the timeline of events, the more we wondered how the intertwining dramas of a) S&P downgrade threats, b) the liability that the ratings agencies may have for their role in the 2008 financial meltdown, and c) the GOP’s attempts to insulate the ratings agencies from b) are all impacting each other.

Timeline of Events

On July 21, 2010 President Obama signs Dodd-Frank into law. Prior to Dodd-Frank, the courts found that credit ratings are expressions of opinion that were protected under the first amendment, subject to a demonstration of actual malice:

The Dodd-Frank Financial Reform Act stripped away those protections, so that CRA’s were now subject to the same expert liability as an auditor or securities analyst, and required only a “knowing” or “reckless” state of mind for liability, rather than proof of scienter. It also repealed Section 436 of the Securities Act of 1933, which granted “safe harbor” for ratings, which were part of a prospectus.

Which, for obvious reasons, made the ratings agencies extremely nervous.

In October 2010 S&P issued its first threat to downgrade US debt: “If the U.S. government maintains its current policies for the next 40 years in the face of rising health care and pension spending pressure, it is unlikely that Standard & Poor’s Ratings Services would maintain its ‘AAA’ rating on the U.S.” The report paints a target on the back of Social Security and Medicare, says nothing about the wars, the Bush tax cuts, private health care costs or the absurdity of 40 year projections...

http://www.nakedcapitalism.com/2011/07/is-standard-and-poor%E2%80%99s-manipulating-us-debt-rating-to-escape-liability-for-the-mortgage-crisis.html


s&p: the crooks who pumped up the mortgage bubble & can't do math.

[flamingdem]

16. Check out the editorial about the unknown person who traded 1 Billion today that they'd downgrade

This stuff is very dirty.

[Major Hogwash]

22. Well, I honestly don't give a fuck about YOUR opinion of this country's economic stability.

So, put that in your pipe and smoke it!!!!

[emilyg]

24. You being forced to read it?

[Major Hogwash]

26. That's not my point.

And you know that.

[Zax2me]

27. As well they should - our credit is a joke

We are trillions in debt, and facing it, STILL refuse to reign in out of control spending.

How can we make it worse? We find ways.
- govt runs out of money, we just print more.
- lower debt ceiling? No, we RAISE it. It's a flexible ceiling, but only one way - up.
- decrease programs? No, we increase the count. Once established, THEY cannot be cut.

We can't stop spending on defense.
We can't stop spending on health care.
we can't stop bailing out wall street.
Cut what?! Not in MY district.

Raise taxes? The rich?
Confiscate 100% of everything the top 1% have - we only make a dent.
That's how deep a hole we are in.

The world is lowering our credit rating because we are acting foolish with our debt. We are doing the same things and not only refusing to change, but increasing the poor choices. Borrow borrow borrow down the road like a junkie just concerned with his next fix. Congress/wall street is taking our money and borrowing on our projected taxes two generations out.
Many are fighting to keep that system in place so yea - the world says FU - no more IOU's until we see some changes in your behavior and bottom line.

I'd like the voters to get back some power. Since we can't trust those we vote for I'd like a few months of payroll tax freeze. Let us have some of the money we work for back and away from wall street and congress - we can't do worse. We might even start a few businesses with that money. Hire some workers.