S&P downgrade U.S Debt

J snazzy

Cuttles!
S&P downgrades U.S. credit rating - Aug. 5, 2011

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.


I don't think we are going to see chaos in the U.S bond market...Japan got downgraded twice, once in Jan 2011 and earlier in 2002,.
 

IggyBiggy

Q('.' Q)
Japan is not the richest nation in the world, nor were they the biggest economy in the world. To say that this is a non issue is foolish and naive considering we could be on the brink of a currency crisis.
 

J snazzy

Cuttles!
Japan is not the richest nation in the world, nor were they the biggest economy in the world. To say that this is a non issue is foolish and naive considering we could be on the brink of a currency crisis.

They were #2. Europe looks like ****, the Swiss Fran and the Yen are being devalued...leaves you what, the Pound?
 

IggyBiggy

Q('.' Q)
They were #2. Europe looks like ****, the Swiss Fran and the Yen are being devalued...leaves you what, the Pound?

Never in the history of america has our **** been downgraded. should send tremors to the bond market. do i really need to answer that question? :coolface:
 

Travis

Lexus ES350 - Nissan Skyline GTR
Reading S&P's official announcement, the primary cause they're citing is the bickering and uncertainty in the government itself more than the level of debt.

This means capitulation must come faster and harder in the next round of debt ceiling talks.

And it calls out the fact that taxes are off the table as another influence. Excellent.

E - basically grats Tea Party. Your fault.
 

artistmcgill

For Sale
Reading S&P's official announcement, the primary cause they're citing is the bickering and uncertainty in the government itself more than the level of debt.

This means capitulation must come faster and harder in the next round of debt ceiling talks.

How do you go from the above, where they do suggest that both parties need to work together...

And it calls out the fact that taxes are off the table as another influence. Excellent.

E - basically grats Tea Party. Your fault.

To this?

you seemed to have skipped that part where they talk about our debt burden being too high, and the need to lower government spending. But, if we ignore that you're completely right about it being the Tea Party's fault.
 

Travis

Lexus ES350 - Nissan Skyline GTR
Simple. By saying "this isn't something we'll negotiate on" is a form of not cooperating or considering a course of action which is perfectly reasonable.
 

idioteque

Pine away for your banner years.
Simple. By saying "this isn't something we'll negotiate on" is a form of not cooperating or considering a course of action which is perfectly reasonable.

It looks like they still won't let up even though S&P said they wanted to see taxes and spending cuts. This is the latest from majority leader Cantor.

"Over the next several months, there will be tremendous pressure on Congress to prove that S&P's analysis of the inability of the political parties to bridge our differences is wrong," Cantor wrote. " In short, there will be pressure to compromise on tax increases. We will be told that there is no other way forward. I respectfully disagree.... I firmly believe we can find bipartisan agreement on savings from mandatory programs that can be agreed to without tax increases. I believe this is what we must demand from the Joint Committee as it begins its work."
 
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