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| Economy |
| US credit rating at risk |
| 2011-04-20 |
| [Al Jazeera] Standard & Poor's (S&P) has threatened to downgrade the United States' prized AAA credit rating unless the B.O. regime and Congress find a way to slash the yawning federal budget deficit within two years. The only way to accomplish that is to start dismantling the enormous machinery of government and trimming what's left. Dump NPR, the Department of Education, Department of Energy, the EPA, the Department of Transportation, Homeland Security, Housing and Urban Development, all the bureaucratic mess that's grown into fiefdoms over the years. We live in a computer age: rather than seeing government grow we should be seeing it shrink as computers pick up the paper shuffling. S&P, which assigns ratings to guide investors on the risks involved in buying debt instruments, slapped a negative outlook on the country's top-notch credit rating, on Monday. It said there is at least a one-in-three chance that it could eventually cut it. A downgrade, which would leave Germany and La Belle France with a higher rating, would erode the status of the United States as the world's most powerful economy and the dollar's role as the dominant global currency. If investors start demanding higher returns for holding riskier US debt, the rise in bond yields would crank up borrowing costs for consumers and businesses. That would threaten to hurt the economy as it recovers from the worst recession since World War II. "This new warning highlights the need for the US to take better control of its fiscal destiny if it is to avoid higher borrowing costs and maintain its central role at the core of the global economy," said Mohamed El-Erian, chief executive at PIMCO, which oversees $1.2tn in assets and has a short position on US government debt. Major US stock indexes fell by more than 1 per cent on the day. Longer-dated government bond prices initially fell but recovered to post solid gains as falling stocks took over as the main driver for price action in the Treasury market. Bond prices frequently trade inversely to stocks. Although the dollar rose as more immediate fiscal problems in Greece hurt the euro and supported some US assets, it is down about 5 pertcent against major currencies in 2011. S&P's move, coupled with record low US interest rates, will do little to make it more attractive, said Kathy Lien, director of research at GFT. "Even though I don't think an actual downgrade would occur, in this very sensitive or vulnerable time for the US dollar, it's enough to spook investors from holding or buying dollars," she said. |
| Posted by:Fred |
| #14 Every Clinton-Bush era de-regulator kept his job under the Enlightened One. Posted by Unavigum Turkeyneck2012 Which should give us an accurate indicator of who is really in control in the US. |
| Posted by: Besoeker 2011-04-20 22:50 |
| #13 There are only two ways of cutting deficits; raise taxes or cut expenditure. Leaving the cutting of taxes to one side and concentrating on expenditure cutting the major issue to address is the pain threshold(I prefer to call it the cold turkey syndrome, more descriptive) A high threshold means a country can handle more pain, a low threshold less pain. A good example of a high threshold would be Ireland, where the populous has meekly accepted their medicine and most of the productive workers have stolen away to foreign shores, leaving the drones behind. An example the low threshold would be Greece where there is low level civil war as exemplified by Keratea. As explosions boom, the town's loudspeakers blare: "Attention! Attention! We are under attack!" Air-raid sirens wail through the streets, mingling with the frantic clanging of church bells. Clouds of tear gas waft between houses as helmeted riot police move in to push back the rebels. This isn't a war zone, but a small town just outside Athens. And while its fight is about a rubbish dump, it captures Greece's angry mood over its devastated economy. As unemployment rises and austerity bites ever harder, tempers seem to fray faster in Greece, with citizens of all stripes thumbing their noses at authority. Some refuse to pay increased highway tolls and public transport tickets. There has been a rise in politicians being heckled and even assaulted. Yesterday, in Thessalonika, scores of activists were arrested after violent clashes with police Now if the US turns out to be a low threshold country and the rubes march on Washington and raze the Houses of Congress and the Senate to the ground before making the politicians perform the Highbury gig while suspended from the nearest lamppost, what would be the constitutional implications? When could new elections be held, etc? |
| Posted by: tipper 2011-04-20 19:54 |
| #12 No-interest savings accounts and high user fees, coupled with high-interest loans and huge credit barriers, won't end until the banks manipulate their way to solvency. The Financial sector is indifferent to interests other than their own. Obama should have been working towards devising new credit instruments, rather than subsidizing the banks and throwing money at non-productive job creation. Every Clinton-Bush era de-regulator kept his job under the Enlightened One. |
| Posted by: Unavigum Turkeyneck2012 2011-04-20 19:05 |
| #11 We have a n imminent warming that terrorists led by Sheik Zerobama are planning to debt bomb American children. |
| Posted by: Bright Pebbles 2011-04-20 14:57 |
| #10 File under"Man made disaster" and alert level Imminent. |
| Posted by: newc 2011-04-20 14:27 |
| #9 Unfortunately BP - the current Administration sees that as a feature - not a bug. |
| Posted by: CrazyFool 2011-04-20 13:01 |
| #8 with the current taxation system the state cannot extort any more without harming the economy even further and thus lowering extortion further. |
| Posted by: Bright Pebbles 2011-04-20 12:59 |
| #7 White House Tried to Get S&P to Not Lower the Outlook or to Keep Silent Regarding the New Rating. The Obama administration privately urged Standard & Poor’s in recent weeks not to lower its outlook on the United States — a suggestion the ratings agency ignored Monday, two people familiar with the matter said. … Treasury officials told S&P analysts that they were underestimating the ability of politicians in Washington to fashion a compromise to curb deficits, a Treasury official said. They argued a change in ratings was not needed at this time because the debt was manageable and the administration had a viable plan in the works, the official said. But S&P analysts told Treasury officials on Friday that they were unmoved — and released a report that expressed skepticism that the political parties could come together on how to bring spending in line with revenue. |
| Posted by: Percy Phusons4229 2011-04-20 11:50 |
| #6 If you want a shock, go to the Economist Intelligence Unit. They rate the Government Finances of the US at a "4" out of 100. Countries with higher ratings include Mynamar, Pakistan, Bangladesh, Iraq, Chad, Mali, Sri Lanka. The only countries lower than the US are Zimbabwe, Angola, Somolia. |
| Posted by: Bill Clinton 2011-04-20 11:00 |
| #5 So is S&P just 'suggesting' to the US Government that it needs to pay/pay more for its next rating? "unless the B.O. regime and Congress find a way to slash the yawning federal budget deficit within two years." Sounds like "spend less", to me. |
| Posted by: g(r)omgoru 2011-04-20 08:37 |
| #4 So is S&P just 'suggesting' to the US Government that it needs to pay/pay more for its next rating? |
| Posted by: Glenmore 2011-04-20 08:00 |
#3 Wiki had a section on criticism of S&P:Credit rating agencies such as Standard & Poor's have been subject to criticism in the wake of large losses beginning in 2007 in the collateralized debt obligation (CDO) market that occurred despite being assigned top ratings by the CRAs. |
| Posted by: Alaska Paul 2011-04-20 02:06 |
| #2 The dems are deliberately spending to take this country down. Either that or they are stupid. Or both. |
| Posted by: Alaska Paul 2011-04-20 01:58 |
| #1 Where is the Dem's "It's all Bush's fault!". Or maybe the Dem's are just running out of other people to blame? |
| Posted by: Unuse Grumble6505 2011-04-20 00:11 |