US AAA credit rating downgraded
$this->bbcode_second_pass_quote('', 'O')ne of the top credit rating agencies, Standard & Poor's, has downgraded the United States' top-notch AAA rating.
S&P cut the long-term US credit rating by one notch to AA+ with a negative outllook, citing concerns about growing budget deficits.
S&P said it was because the deficit reduction plan passed by Congress on Tuesday did not go far enough.
Washington was locked in months of acrimonious partisan bickering over a bill to raise the US debt ceiling.
As rumours swirled earlier about the downgrade, unnamed US officials had told US media that S&P's analysis of the US economic situation was deeply flawed.
Correspondents say a downgrade could further erode global investors' confidence in the US economy, which is already struggling with huge debts and unemployment of 9.1%.
S&P said in its report issued late on Friday: "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 stabilise 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."
PeakOil is You
BREAKING: US AAA credit rating downgraded
BREAKING: US AAA credit rating downgraded
by eXpat » Fri 05 Aug 2011, 21:03:53
http://www.bbc.co.uk/news/world-us-canada-14428930
"I learned long ago, never to wrestle with a pig. You get dirty, and besides, the pig likes it."
George Bernard Shaw
“You can ignore reality, but you can't ignore the consequences of ignoring reality.” Ayn Rand
George Bernard Shaw
“You can ignore reality, but you can't ignore the consequences of ignoring reality.” Ayn Rand
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It's Official: S&P Downgrades US Credit Rating
by Daniel_Plainview » Fri 05 Aug 2011, 21:04:37
Standard & Poor's Downgrades US Credit Rating From AAA to AA+
$this->bbcode_second_pass_quote('', 'T')he ratings agency Standard & Poor's has reduced the United States' credit rating from AAA to AA+ with a negative outlook, the company announced late Friday.
"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," Standard & Poor's said in a statement announcing the move.
"More broadly," the agency added, "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," S&P added.
The federal government had been expecting and preparing for Standard & Poor's to downgrade the rating of U.S. debt, government officials told ABC News before the reduction was formally announced.
However, another government official said S&P's analysis was "based on flawed math and assumptions" to the tune of roughly $2 trillion and "S&P has acknowledged its numbers are wrong," so the Obama administration pushed back. S&P refused to comment at the time on the alleged numerical error.
$this->bbcode_second_pass_quote('', 'T')he ratings agency Standard & Poor's has reduced the United States' credit rating from AAA to AA+ with a negative outlook, the company announced late Friday.
"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," Standard & Poor's said in a statement announcing the move.
"More broadly," the agency added, "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," S&P added.
The federal government had been expecting and preparing for Standard & Poor's to downgrade the rating of U.S. debt, government officials told ABC News before the reduction was formally announced.
However, another government official said S&P's analysis was "based on flawed math and assumptions" to the tune of roughly $2 trillion and "S&P has acknowledged its numbers are wrong," so the Obama administration pushed back. S&P refused to comment at the time on the alleged numerical error.
Why it took this long to recognize the obvious ... but it finally happened:
Last edited by Ferretlover on Fri 05 Aug 2011, 22:11:55, edited 1 time in total.
Reason: Merged thread.
Reason: Merged thread.
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Daniel_Plainview - Prognosticator
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Re: BREAKING: US AAA credit rating downgraded
by eXpat » Fri 05 Aug 2011, 21:08:06
All sort of nasty consequences
Analysis: U.S. downgrade could accelerate dollar decline
$this->bbcode_second_pass_quote('', '(')Reuters) - A downgrade to the U.S. sovereign credit rating could open up a new world of pain for the dollar.
Already reeling from low interest rates, slow economic growth, and foreign investors eager to diversify away from U.S. assets, the loss of AAA status could cement the view the dollar is no longer the safest harbor in a troubled world.
The risk of a downgrade remains real even after Washington's $2.1 trillion budget savings deal, since it fell well short of the $4 trillion Standard & Poor's said would be enough to support the AAA rating with a stable outlook.
That it took so much drama to produce such a limited round of cuts has disappointed investors who had grown weary of fiscal weakness during budget crises in the euro zone countries.
"A debt ceiling raised plus downgrade equals weak dollar," said Jonathan Lewis, founding principal of Samson Capital Advisors in New York, which manages assets of $7 billion.
"Not only would a double AA rating be a concern for international investors, but the fiscal imbalances would not be a good reason to buy the dollar."
For years, the dollar has acted as the world's reserve currency, an international store of value for central banks.
However, the fact the other safe-haven currencies are gaining at the expense of the dollar suggests investors' views may already be changing, perhaps in anticipation of a downgrade or at least a tough fight to hang on to AAA.
Analysis: U.S. downgrade could accelerate dollar decline
$this->bbcode_second_pass_quote('', '(')Reuters) - A downgrade to the U.S. sovereign credit rating could open up a new world of pain for the dollar.
Already reeling from low interest rates, slow economic growth, and foreign investors eager to diversify away from U.S. assets, the loss of AAA status could cement the view the dollar is no longer the safest harbor in a troubled world.
The risk of a downgrade remains real even after Washington's $2.1 trillion budget savings deal, since it fell well short of the $4 trillion Standard & Poor's said would be enough to support the AAA rating with a stable outlook.
That it took so much drama to produce such a limited round of cuts has disappointed investors who had grown weary of fiscal weakness during budget crises in the euro zone countries.
"A debt ceiling raised plus downgrade equals weak dollar," said Jonathan Lewis, founding principal of Samson Capital Advisors in New York, which manages assets of $7 billion.
"Not only would a double AA rating be a concern for international investors, but the fiscal imbalances would not be a good reason to buy the dollar."
For years, the dollar has acted as the world's reserve currency, an international store of value for central banks.
However, the fact the other safe-haven currencies are gaining at the expense of the dollar suggests investors' views may already be changing, perhaps in anticipation of a downgrade or at least a tough fight to hang on to AAA.
http://www.reuters.com/article/2011/08/03/us-markets-forex-downgrade-idUSTRE7725ZK20110803
"I learned long ago, never to wrestle with a pig. You get dirty, and besides, the pig likes it."
George Bernard Shaw
“You can ignore reality, but you can't ignore the consequences of ignoring reality.” Ayn Rand
George Bernard Shaw
“You can ignore reality, but you can't ignore the consequences of ignoring reality.” Ayn Rand
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eXpat - Intermediate Crude
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Re: BREAKING: US AAA credit rating downgraded
by eXpat » Fri 05 Aug 2011, 21:25:24
And more consequences:
$this->bbcode_second_pass_quote('', '[')b]The U.S. is downgraded. Now what?
By Dyan Matthews
S&P announced that it downgraded the U.S. debt from AAA to AA+ tonight. Commentators are split as to whether this would have major negative consequences for both the US and world economy, or whether it would be basically meaningless. Here’s the case for each position.
Why It Might Matter: If the US debt gets downgraded, many other debt instruments will likely get downgraded as well. When Moody’s put US debt on review for downgrade during the debt ceiling standoff, if also put on notice 7,000 other bonds, worth a total of $130 billion, that rely directly on revenue from federal government payments, such as certain kinds of municipal bonds. Bonds that are indirectly dependent on the federal government, such as those issued by hospitals that receive Medicare payments, or defense firms reliant on Pentagon contracts, could get downgraded as well. In addition, many everyday interest rates - such as those for mortgages, car loans, and credit cards - are pegged to US Treasuries, meaning that if a downgrade forces up interest rates on US debt (which is likely, but will depend on how the markets react) interest rates for those will shoot up as well. This would raise the cost of borrowing across the system, depressing the economy.
It would also lead to widespread uncertainty. As the Post’s Ezra Klein wrote the debt ceiling standoff threatened to force a downgrade, “The cornerstone of the global financial economy is the idea that Treasuries are risk-free.” A downgrade would mean Treasuries are no longer risk-free, and thus shake up the whole system. The last time AAA debt lost its luster in such a dramatic fashion was 2008, when AAA-rated subprime securities were discovered not to be sound. The result was the current financial crisis.
Additionally, many institutional investors - such as pension or money market funds - are required to hold a certain amount of AAA debt, meaning that some might be forced to sell off US debt in the event of a downgrade. Given that money market funds hold about $338 billion in US debt, or almost half of short-term holdings, this would be an enormous selloff, which would raise interest rates still higher and greatly amplify the economic damage incurred due to a downgrade.
$this->bbcode_second_pass_quote('', '[')b]The U.S. is downgraded. Now what?
By Dyan Matthews
S&P announced that it downgraded the U.S. debt from AAA to AA+ tonight. Commentators are split as to whether this would have major negative consequences for both the US and world economy, or whether it would be basically meaningless. Here’s the case for each position.
Why It Might Matter: If the US debt gets downgraded, many other debt instruments will likely get downgraded as well. When Moody’s put US debt on review for downgrade during the debt ceiling standoff, if also put on notice 7,000 other bonds, worth a total of $130 billion, that rely directly on revenue from federal government payments, such as certain kinds of municipal bonds. Bonds that are indirectly dependent on the federal government, such as those issued by hospitals that receive Medicare payments, or defense firms reliant on Pentagon contracts, could get downgraded as well. In addition, many everyday interest rates - such as those for mortgages, car loans, and credit cards - are pegged to US Treasuries, meaning that if a downgrade forces up interest rates on US debt (which is likely, but will depend on how the markets react) interest rates for those will shoot up as well. This would raise the cost of borrowing across the system, depressing the economy.
It would also lead to widespread uncertainty. As the Post’s Ezra Klein wrote the debt ceiling standoff threatened to force a downgrade, “The cornerstone of the global financial economy is the idea that Treasuries are risk-free.” A downgrade would mean Treasuries are no longer risk-free, and thus shake up the whole system. The last time AAA debt lost its luster in such a dramatic fashion was 2008, when AAA-rated subprime securities were discovered not to be sound. The result was the current financial crisis.
Additionally, many institutional investors - such as pension or money market funds - are required to hold a certain amount of AAA debt, meaning that some might be forced to sell off US debt in the event of a downgrade. Given that money market funds hold about $338 billion in US debt, or almost half of short-term holdings, this would be an enormous selloff, which would raise interest rates still higher and greatly amplify the economic damage incurred due to a downgrade.
http://www.washingtonpost.com/blogs/ezra-klein/post/what-would-happen-if-us-debt-gets-downgraded/2011/08/05/gIQAx4NKxI_blog.html
"I learned long ago, never to wrestle with a pig. You get dirty, and besides, the pig likes it."
George Bernard Shaw
“You can ignore reality, but you can't ignore the consequences of ignoring reality.” Ayn Rand
George Bernard Shaw
“You can ignore reality, but you can't ignore the consequences of ignoring reality.” Ayn Rand
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eXpat - Intermediate Crude
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Shame on you! 
I don't want to derail the thread onto me and preps or lack thereof, just wanted to note that here is my canary 
