AP: USA downgraded by S&P

[Hubbs]

if it makes ya feel better the big dogs are piling it up in the banks

Why in God's name would that make anyone feel better about their investments?

Leave it where it is. You already ate some of the fall - you don't wanna miss the recovery.

[Predicto]

Have one for me and don't get mugged Haole

They don't allow muggers at Kohala Coast resorts. Heck, they barely allow Hawaiians.

---------- Post added August-5th-2011 at 10:25 PM ----------

Until that crashes, hell yes. There is no "put your money here and you'll make crazy profits and never risk any of it" option. You have to educate yourself on the investment, and stay on top of it. There will be a time to get out of gold and those that do will smirk at those that didn't.

Absolutely. If you bought gold in 1980, you are still waiting to get back to even when inflation is taken into account. 30 years - no return.

Gold is an enormous gamble.

[twa]

They don't allow muggers at Kohala Coast resorts. Heck, they barely allow Hawaiians. .

If the market keeps tanking it might be one of the desperate Wall Streeters ya got to worry bout :pfft:

Have fun,I hear it is nice

[SkinsHokieFan]

Absolutely. If you bought gold in 1980, you are still waiting to get back to even when inflation is taken into account. 30 years - no return.

Gold is an enormous gamble.

P- Let us be honest. The economic growth we witnessed between 1981 and roughly 2006 is simply not going to happen again barring some technological game changer.

The "if you bought in 1980" line of thinking simply does not apply anymore. Are we ever going to have an 8 year run where the national debt only goes up by 1.6 trillion? (The Clinton years)

These days, that happens in 1 year

[Toe Jam]

Predicto has finally snapped.

This is truly the end.

[Westbrook36]

President Obama DOES NOT want anyone blaming Bush. He said so himself.

[DRSmith]

There's another thread around here where people were saying the cuts were too big and that caused the stock fall off. Now S&P is saying those cuts were too small.

Damned if you do...

They are not saying they are too little this is more an indictment of the political process now.

[RLeVan]

I just see it as a cascading effect of greed and fiscal irresponsibility by the govt and the general public. We've become a generation of "give me more" and then we point the finger at someone else when things go pear shaped. It's probably gonna take another depression for people to realize the difference between want and need.

[mardi gras skin]

Ride it out for how long? I'm seriously thinking about cashing out my 401k and either putting it all in CD's or digging a hole in my yard and burying it.

You're buy stocks. Expensive stocks aren't helping you because you aren't cashing out for decades, right? If so, a crashing stock market is great for your purchasing power. If the market drops by half its value, you're able to buy up twice as much stocks as you were before the crash. You're purchasing power goes up when the stock market goes down.

Kind of like the housing market. If you're buying houses, it helps you when housing prices fall. You don't really need housing prices to be high again until you plan to sell your houses. Buying houses or buying stocks, lower prices are way better than higher prices. When the stock market crashed last time, I acquired shares much faster than I did before the crash. It was great.

But all this reminds me, what are you doing zoony? You timed the last crash perfectly if I recall. Do you think we're at the top again?

[THEREALTOR1]

My guess is its gonna come down to 2 choices: either the *******s in washington quit politicing and do what should have been done long ago (highly unlikely), or this will be used as an open invitation to usher in QE3 (probably more likely). Either way i'm not looking forward to next week. BTW if you're in the process of buying a home and you're floating the IR at the moment, you may wanna call your LO today and have him/her lock in (if they didn't do it by Friday morning like they should have). I think rates are gonna post ugly Monday morning and only get worse from there.

[DRSmith]

I don't understand. If the Republicans didn't demand it, we would have just raised the debt limit with no action taken on the debt limit at all. How is this the Tea Party's fault?

What could have been done was raising it with some revenues included and investments into the country which would have led to jobs.

For instance a bank to provide for infrastructure spending which would have gotten people to work.

The tax credit that Obama is proposing to hire veterns could have been offered to all businesses to hire someone who is unemployed.

If you did those things coupled with a real plan to cut defense spending (end the wars) and really fix the amount spent on health care and thus make it so it makes more sense and provides coverage and then demonstrate how you plan to cut costs on things like SS (ie means teasting for example)

All you have right now is diealouges who ignore what most economist teach digging say cut cut cut which means a far less certain growth in the future.

Every country right not that is doing nothing but cutting is getting looked at again.

You know why Germany did so well nd is doing so well government spending to the tune of 43% of the GDP

[NoVaO]

A couple things...

1. Don't overreact to this...the markets I believe already expected this to be coming. Interest rates, even if they rise, will still be extremely low. And it's possible S&P will simply be ignored. 2 of the other credit ratings affirmed our AAA status. U.S. bonds are still viewed as an extremely safe investment.

2. This clearly would not have happened if there was just a clean debt ceiling bill from the beginning. None of this credit rating stuff started popping up until there was talk about holding the debt ceiling hostage and actually allowing the country to go into default.

And even though the Tea Party decided to threaten the country with default and place the country's credit rating at risk, their own ideology got in the way of something that could have been something much bigger. They refused to put revenues on the table. And this makes them less concerned about the deficit, and more concerned about what role government should be playing in our lives. Their primary goal is not to lower the deficit. It's to lower taxes. It's to shrink government.

Let me say this a little more clearly...not only did the Tea Party put our credit rating at risk by threatening to put the country into default if their demands weren't met, but they effectively killed the only deal that would have been enough to maintain our AAA rating with S&P.

They started this mess and didn't allow a solution to get us out of it. I'd probably pin 85% of the blame on the Tea Party and Republicans in Congress and I think I'm being overly generous with that figure.

[NavyDave]

I just see it as a cascading effect of greed and fiscal irresponsibility by the govt and the general public. We've become a generation of "give me more" and then we point the finger at someone else when things go pear shaped. It's probably gonna take another depression for people to realize the difference between want and need.

With a lot of the clueless worshiping at the Church of ME. People have been conditioned into thinking they deserve this and that for free without actually going out and earning it.

[DRSmith]

With a lot of the clueless worshiping at the Church of ME. People have been conditioned into thinking they deserve this and that for free without actually going out and earning it.

You know that me thing cuts both ways with people being conditioned to not see themselves as part of a largercommunity called a country where everyone needs to pitch in and those of us who have more can give more instead I see a lot of why should I have to put a percentage of the money I earn into the pot to help out.

[Tulane Skins Fan]

Baba lance? Is that baba booey's cousin?

iPad speak.

I don't believe either of the above statements. But they're interchangeable.

Sure. But the democratic party put more cuts on the table which were rejected because of tax increases.

[aREDSKIN]

They are not saying they are too little this is more an indictment of the political process now.

We've had a SPENDING problem now for decades. It's quite clear that deficit spending is a political vehicle for buying votes and political posturing. Both sides. Clear EVIDENCE that EVERYONE is doing it.

"The administration and Democrats in Congress had sought an increase in the debt limit without any spending cuts or reforms. Republicans made clear the American people would not tolerate that and fought for the largest spending cuts possible. With the Budget Control Act, we made a positive first step toward reducing the debt, but much more must be done.

"As S&P noted, reforming and preserving our entitlement programs is the 'key to long-term fiscal sustainability,' " Boehner said.

http://www.msnbc.msn.com/id/44043408/ns/politics/

[mardi gras skin]

1. Don't overreact to this...the markets I believe already expected this to be coming. Interest rates, even if they rise, will still be extremely low. And it's possible S&P will simply be ignored. 2 of the other credit ratings affirmed our AAA status. U.S. bonds are still viewed as an extremely safe investment.

I think you're right. I posted this a few weeks ago in the debt ceiling thread:

http://www.smartmoney.com/invest/stocks/sp-moodys-downgraded-to-irrelevant-1311719817477/?link=SM_hp_ls4e

S&P, Moody's Irrelevant on Treasurys

What ratings firms say about Treasurys matters less than many suppose.

The closely watched 10-year Treasury has gained since the beginning of the year, dropping its yield from 3.4% to 3.0%. That means interest rates on the things the president mentioned aren't expected to "skyrocket" soon--not even if the rocket he had in mind is only one of those backyard balsa-wood-and-gunpowder fliers.

Maybe financial markets are waiting for the actual downgrades. But that would contradict an investment law as basic as gravity: Markets are forward-looking. At any given moment, they anticipate information that's known or even suspected. S&P announced a negative outlook on the U.S. (warning of a possible downgrade) in April, and Moody's announced something similar earlier this month. By now, anything that would have happened has happened.

It's not that investors doubt the judgment of raters, although the latter have attracted plenty of jeers in recent years, partly because their pay-me-to-rate-you business models are inherently awkward, and partly because they have missed some colossal collapses. Enron had an investment-grade credit rating four days before it went bankrupt. During the recent housing bust, mortgage securities that were sold as Parmigiano-Reggiano turned out to be a notch below Cheez Whiz. That has led some outside analysts to mutiny. In December, Meredith Whitney, who made her name covering banks, told CBS's "60 Minutes" that 50 to 100 "sizeable" municipalities could default on amounts totaling "hundreds of billions of dollars," directly contradicting the ratings agencies, who expect that municipal defaults will be isolated and manageable.

So far, the ratings agencies have been right on municipalities. I suspect that they've taken recent criticism to heart and are working hard to produce good research. And in fairness, creditworthiness is a complicated thing to judge, depending as it does on human behavior, and the agencies get plenty of calls right. If they say the U.S. is bucking for a downgrade, I'll take their word for it. I'm unfashionably bullish on America, but I'm not sure anything deserves a perfect credit rating, least of all something that can make its own money.

But I also think the opinions of S&P and Moody's (and Fitch, which says it will decide its opinion of the U.S. in August) are irrelevant when it comes to Treasurys. These firms add value by tracking a universe of bond issuers too vast for most investors to watch. Their opinions on Ford Motor or the city of Rochester, N.Y., matter greatly to bond buyers.

The world doesn't need help analyzing Treasurys, though. No entity in the world is more closely watched than the United States government, not even Lady Gaga. And none publishes more and better information on its financial condition. The sort of investors who decide Treasury prices--foreign governments, giant mutual funds, the Social Security Trust Fund--don't wait for S&P or Moody's to tell them whether to buy. They do the math themselves.

Destino's point that S&P's numbers were off by $2 trillion reinforces this point. The S&P isn't revealing unknown variables when they assess the credit worthiness of the US federal government.

2. This clearly would not have happened if there was just a clean debt ceiling bill from the beginning. None of this credit rating stuff started popping up until there was talk about holding the debt ceiling hostage and actually allowing the country to go into default.

Blah. This talking point that the credit rating agencies would have just gone along happily ignoring ever increasing debt loads if the Tea Party hadn't brought it to their attention is preposterous. S&P used this situation, no doubt, but they would have used a clean debt increase as well. Their issue wasn't that we wouldn't raise the debt ceiling (obviously, as this downgrade happened AFTER we raised the debt ceiling) but that we wouldn't reduce our debt load. See if you can find anything about "debt ceiling hostage" in this article from April:

S&P warning: Fix deficit or risk credit rating, April 18, 2011

http://www.deseretnews.com/article/700128284/SP-warning-Fix-deficit-or-risk-credit-rating.html

WASHINGTON — A key credit agency issued an unprecedented warning to the United States government Monday, urging Washington to get a grip on its finances or risk losing the nation's sterling credit rating.

For the first time, Standard & Poor's lowered its long-term outlook for the federal government's fiscal health from "stable" to "negative," and warned of serious consequences if lawmakers fail to reach a deal to control the massive federal deficit.

An impasse could prompt the agency to strip the government of its top investment rating in the next two years, S&P said. A loss of the triple-A rating would ripple through the American economy, making loans more expensive and credit more difficult to obtain.

The downgrade was interpreted as a rebuke to President Barack Obama and congressional Republicans, admonishing them to put politics aside and come up with a long-term financial plan as soon as possible...

...The government is on pace to run a record $1.5 trillion deficit this year, the third consecutive deficit exceeding $1 trillion.

But so far, S&P sees little chance that the White House and Congress will agree on a deficit-reduction plan before the November 2012 elections, and the rating agency doubts that any plan would be in place until 2014 or later.

Obama and congressional Republicans are sparring over how to reduce the nation's red ink. If Congress refuses to raise the nation's debt limit this spring, and the U.S. Treasury lost authority to borrow additional money, the government would not be able to pay its bills and would default on its debt.

Both sides have proposed cutting $4 trillion from future deficits over the next 10 to 12 years.

This isn't ignoring Destino's primary point in this thread. The credit rating agencies are sheisty.

[DRSmith]

We've had a SPENDING problem now for decades. It's quite clear that deficit spending is a political vehicle for buying votes and political posturing. Both sides. Clear EVIDENCE that EVERYONE is doing it.

"The administration and Democrats in Congress had sought an increase in the debt limit without any spending cuts or reforms. Republicans made clear the American people would not tolerate that and fought for the largest spending cuts possible. With the Budget Control Act, we made a positive first step toward reducing the debt, but much more must be done.

"As S&P noted, reforming and preserving our entitlement programs is the 'key to long-term fiscal sustainability,' " Boehner said.

http://www.msnbc.msn.com/id/44043408/ns/politics/

The political brinksmanship of recent months highlights what we see as

America's governance and policymaking becoming less stable, less effective,

and less predictable than what we previously believed. The statutory debt

ceiling and the threat of default have become political bargaining chips in

the debate over fiscal policy. Despite this year's wide-ranging debate, in our

view, the differences between political parties have proven to be

extraordinarily difficult to bridge, and, as we see it, the resulting

agreement fell well short of the comprehensive fiscal consolidation program

that some proponents had envisaged until quite recently. Republicans and

Democrats have only been able to agree to relatively modest savings on

discretionary spending while delegating to the Select Committee decisions on

more comprehensive measures. It appears that for now, new revenues have

dropped down on the menu of policy options.

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

http://www.standardandpoors.com/servlet/BlobServer?blobheadername3=MDT-Type&blobcol=urldata&blobtable=MungoBlobs&blobheadervalue2=inline%3B+filename%3DUS_Downgraded_AA%2B.pdf&blobheadername2=Content-Disposition&blobheadervalue1=application%2Fpdf&blobkey=id&blobheadername1=content-type&blobwhere=1243942957443&blobheadervalue3=UTF-8

[mardi gras skin]

http://www.standardandpoors.com/servlet/BlobServer?blobheadername3=MDT-Type&blobcol=urldata&blobtable=MungoBlobs&blobheadervalue2=inline%3B+filename%3DUS_Downgraded_AA%2B.pdf&blobheadername2=Content-Disposition&blobheadervalue1=application%2Fpdf&blobkey=id&blobheadername1=content-type&blobwhere=1243942957443&blobheadervalue3=UTF-8

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 general government debt burden by the middle of the decade.

Congress was unwilling to raise taxes or reduce entitlements. Both sides dug in. Here we are.

[DRSmith]

http://www.standardandpoors.com/servlet/BlobServer?blobheadername3=MDT-Type&blobcol=urldata&blobtable=MungoBlobs&blobheadervalue2=inline%3B+filename%3DUS_Downgraded_AA%2B.pdf&blobheadername2=Content-Disposition&blobheadervalue1=application%2Fpdf&blobkey=id&blobheadername1=content-type&blobwhere=1243942957443&blobheadervalue3=UTF-8

Congress was unwilling to raise taxes or reduce entitlements. Both sides dug in. Here we are.

And if you look at one of your biggest exspense health care and there are those elected who oppose the best way to curb that.

I wonder how things would have gone with the 3 for 1 cuts to increases in revenue that Obama had been talking about had gone through

[endzone_dave]

We've had a SPENDING problem now for decades. It's quite clear that deficit spending is a political vehicle for buying votes and political posturing. Both sides. Clear EVIDENCE that EVERYONE is doing it.

This is the absolute truth. Americans lap up their handouts like dogs and show their appreciation by keeping these idiots in power.

[DRSmith]

I do not see how Americans can say they have a spending problem when as a percentage of the GDP America spends less many of those countries that have a triple AAA rating.

Their taxation as a percentage of the GDP is also way lower

http://en.wikipedia.org/wiki/Government_spending

[mardi gras skin]

Oh, and for those saying this downgrade was a debt ceiling issue:

We have taken the ratings off Credi****ch because the Aug. 2 passage of the Budget Control Act Amendment of 2011 has removed any perceived immediate threat of payment default posed by delays to raising the government's debt ceiling. In addition, we believe that the act provides sufficient clarity to allow us to evaluate the likely course of U.S. fiscal policy for the next few years.

They don't have a problem with the outcome of the deb ceiling vote. They have a problem with the Republican's stubborn refusal to raise taxes and the Democrat's stubborn refusal to reduce entitlement spending.

[endzone_dave]

I do not see how Americans can say they have a spending problem when as a percentage of the GDP America spends less many of those countries that have a triple AAA rating.

Their taxation as a percentage of the GDP is also way lower

http://en.wikipedia.org/wiki/Government_spending

Look at the US gap between tax burden and government spending. The gap is what is killing us.

[DRSmith]

Look at the US gap between tax burden and government spending. The gap is what is killing us.

Yep seems to be more a revnue problem to me

If you look at the countries on the list and how they are rated and how they are doing you see the spending is higher as is the taxation