Article

2011-08-06 Economy

S&P cuts US credit rating, China calls for new reserve currency

Archived material is restricted to Rantburg regulars and members. If you need access email fred.pruitt=at=gmail.com with your nick to be added to the members list. There is no charge to join Rantburg as a member.

Posted by anon1 2011-08-06 11:14|| || Front Page|| [1 views ] Top

#1 hysterical much?

Posted by Frank G 2011-08-06 11:37|| 2011-08-06 11:37|| Front Page Top

#2 Let's stiff China First!

Posted by S 2011-08-06 11:40|| 2011-08-06 11:40|| Front Page Top

#3 Too bad they didn't know how to analyze mortgage backed securities.

Posted by Nimble Spemble 2011-08-06 12:02|| 2011-08-06 12:02|| Front Page Top

#4 A country that has a carbon tax is not one to be giving out economic advice. As for the standard lefty trope of military spending being the biggest part of the US budget, that is only true if you break entitlements and health care down into teensy weensy little categories so you can count them all separately.

Anon1 is correct that US finances are *bleep*ed, but military spending is not the cause. People aware of Cloward/Pliven and Alinsky strategies might suggest this was the plan all along.

Posted by SteveS 2011-08-06 12:02|| 2011-08-06 12:02|| Front Page Top

#5 hey steve

it's not my country giving advice and we don't have a carbon tax yet... nor will we if me and my mates have any say in the matter. it's insanity of the highest order.

I agree: military spending is not the cause of your woes. But it is the easiest solution.

What are you getting out of it? Do you really give a sh*t if some afghani villager lives their life as a free person or an islamist zombie?

If they want to change they will and who cares - let them bang their heads on the ground five times a day.

it's more important to be strong at home right now as your economy is falling apart.

You are right: health care is draining the life out of the US economy

it is a crazy system -- how did the US end up with a system where an employer is somehow responsible for heath insurance of a worker

crazy

Just go like Britain and Australia

Britain's NHS is a great system and cheaper to administer arguably once you factor in the waste along the way

Australia's Medicare system was also great until a few years ago when they started bringing in bullying "incentives" to force us onto private health insurance for what used to be paid for by taxes.

Some things are just cheaper for the government to provide and basic healthcare is one of them.

It's cheaper for the country as a whole - you get to simplify the system and wipe out the middlemen.

you can still have better quality healthcare for private insurance payers

and things like plastic surgery and discretionary items are not covered.

just the really necessary stuff like emergency surgery, cancer etc.

Anyway I digress. Healthcare only has a small amount to do with this.

The big problem is: too much debt

The government is broke and this downgrade has come right at the time when Europe is whacked with sovereign debt woes and stock markets are plunging.

Lowering the credit rating means the cost of credit rises.

Bond yields rise, prices fall, interest rates rise.

when the Government has to pay more to service it's debt, it's a downward spiral.

Posted by anon1 2011-08-06 12:14|| 2011-08-06 12:14|| Front Page Top

#6 One bright side -- China is caught in a trap of it's own making.

On the one hand they MUST keep buying US treasuries if they want to artificially depress the Yuan. That's how they manipulate their currency.

And yes, that has been the cause of their dramatic rise and the loss of the manufacturing industry: nobody could compete with child labour PLUS an artificially depressed currency

BUT on the other hand, the US devalues the dollar then the purchasing power of those bonds declines.

Sucked in China

The only problem is it will hurt the US citizenry particularly savers and retirees.

And just watch the markets plunge Monday.

The spread betting indexes are already factoring in a 100+ crash for Australia.

Posted by anon1 2011-08-06 12:50|| 2011-08-06 12:50|| Front Page Top

#7 I agree: military spending is not the cause of your woes. But it is the easiest solution.

The easiest thing to do? Of course it is. We could have ignored what happened on 9/11 and left bin Laden to continue terrorizing us and you too. It is far more difficult to be responsible with domestic spending especially when most of our politicians are crooked morons. But you can watch your own, thank you very much.

Posted by Abu Uluque 2011-08-06 13:12|| 2011-08-06 13:12|| Front Page Top

#8 As for international supervision over the US dollar, that is a pipe dream of our enemies. It ain't gonna happen.

Posted by Abu Uluque 2011-08-06 13:16|| 2011-08-06 13:16|| Front Page Top

#9 Anyone who signs up for reserve currency status is also signing up for hundreds of billions in annual trade deficits. This is why nobody wants this poisoned chalice except Uncle Sucker. The Europeans don't want it and the Chinese are certainly not about to stop the currency restrictions and manipulation that keep the RMB's rank at position number 9 in terms of most-used currencies in international trade.

Posted by Zhang Fei 2011-08-06 14:00|| 2011-08-06 14:00|| Front Page Top

#10 anon1, you ask what we're getting out of our military spending. The question you might better ask is what you're getting out of our military spending. Pull out a map and think about the sea lanes Australia relies on; and consider the fact that, however brave and capable their crews, the RAN's surface combatants just might fill the hangar deck of the Abraham Lincoln. Or does your confidence in China's intentions and capabilities know no bounds?

Posted by Matt 2011-08-06 14:02|| 2011-08-06 14:02|| Front Page Top

#11 What Matt said.

The USN is the final arbiter of all inter-ocean trade disputes, it's not fair, but that's the way it is, this peculiar power belongs to the United States of America. Coal shortage in China? It could get damn worse in 48 hours, Pakistan got a maize shortage? Could get terminal in 72 hours. Shortage of oil anywhere in the damn world we want to happen? 96 hours. $250 oil? LOLA! How about no oil? The US is an oil producer, it's a stunning fact of life, but that's the way it is. Cut out drive thru windows and low-rider parades we're good to go. We got your damn reserve currency right here.

Posted by S 2011-08-06 17:46|| 2011-08-06 17:46|| Front Page Top

#12 Goodness. You don't often, S, but when you do it was worth the wait.

anon1, I hope it doesn't hurt too much on Monday.

Posted by trailing wife 2011-08-06 19:11|| 2011-08-06 19:11|| Front Page Top

#13 The USD as reserve currency isn't the big issue. Its the USD as the currency of world trade.

Without a single currency to price international trade, multi-lateral trading collapses. And we go to bi-lateral trading which is little more than barter.

Posted by phil_b 2011-08-06 20:08|| 2011-08-06 20:08|| Front Page Top

#14 But of course, the former is the direct result of the latter, phil. The USD is a reserve currency precisely because it is the currency of trade - and it is the currency of trade because of the volume of trade we do.

Time to drill domestically, folks. The oil outflows alone have been overly costly and the oil ticks are overly bloated.

Posted by lotp 2011-08-06 20:32|| 2011-08-06 20:32|| Front Page Top

#15 Drilling is less than half of it. The US tends to export a lot to the countries from which it imports oil. A far larger problem is the merchandise trade deficit. That's also where lots of people are (un)employed. Oil exploration, drilling, transport and refining - not so manpower intensive.

U.S. Trade Balance, by Partner Country 2010
1 China ($278,301.2)
2 Mexico ($97,221.9)
3 Canada ($69,580.5)
4 Japan ($64,211.0)
5 Germany ($36,494.6)
6 Ireland ($27,333.2) (!!! Ireland???)
7 Nigeria ($26,000.9)
8 Venezuela ($22,180.7)
9 Saudi Arabia ($20,199.1)
10 Russia ($19,542.5)
11 Italy ($15,175.0)
12 Israel ($14,496.0)
13 Thailand ($14,406.1)
14 India ($13,220.2)
15 France ($13,819.4)
16 Malaysia ($13,684.0)
17 Algeria ($12,912.8)
18 Taiwan ($11,664.8)
19 Vietnam ($11,244.9)
20 Korea ($11,077.1)

Posted by Eohippus Phater7165 2011-08-06 21:23|| 2011-08-06 21:23|| Front Page Top

#16 The top five sources of US crude oil imports for May were
Canada (2,006 thousand barrels per day),
Saudi Arabia (1,197 thousand barrels per day),
Mexico (1,154 thousand barrels per day),
Venezuela (895 thousand barrels per day), and
Nigeria (808 thousand barrels per day).

And Obama is doing his damnedest to restrict Canadian oil sands production and drive them into the waiting arms of the Chinese.

Posted by Eohippus Phater7165 2011-08-06 21:35|| 2011-08-06 21:35|| Front Page Top

#17 WAFF > [WSJ] WHERE IS CHINA STASHING ITS US$3.2 TRILYUHN IN RESERVE CURRENCY?

ARTIC = Most Perts think it is most likely mixed in wid [outstanding] US Debt, but the truth remains highly speculative.

IT CAN'T BE AT FORT KNOX BECUZ RUSSIA'S VLAD PUTIN SAYS THERE'S NO US GOLD [or ANYTHING ELSE?] THERE ANYMORE???

Posted by JosephMendiola 2011-08-06 22:34|| 2011-08-06 22:34|| Front Page Top

23:33 James
23:01 49 Pan
22:43 Free Radical
22:34 JosephMendiola
22:18 Dale
22:17 JosephMendiola
21:55 JosephMendiola
21:39 JosephMendiola
21:35 Eohippus Phater7165
21:28 trailing wife
21:26 Procopius2k
21:23 Angaviter Angimp5208
21:23 Eohippus Phater7165
21:16 trailing wife
20:45 Perfesser
20:42 lotp
20:39 Skunky Glin****
20:35 Glusoger Gruter1463
20:32 lotp
20:17 Redneck Jim
20:12 Redneck Jim
20:08 phil_b
20:03 Scooter McGruder
19:47 Water Modem