US Loses AAA Credit Rating After S&P Downgrade

[Feuer Frei!]

One of the world's leading credit rating agencies, Standard & Poor's, has downgraded the United States' top-notch AAA rating for the first time ever.
S&P cut the long-term US rating by one notch to AA+ with a negative outlook, citing concerns about budget deficits.
The agency said the deficit reduction plan passed by the US Congress on Tuesday did not go far enough.
Correspondents say the downgrade could erode investors' confidence in the world's largest economy.
It is already struggling with huge debts, unemployment of 9.1% and fears of a possible double-dip recession.
The downgrade is a major embarrassment for the administration of President Barack Obama and could raise the cost of US government borrowing.
This in turn could trickle down to higher interest rates for local governments and individuals.


However, some analysts said with debt woes across much of the developed world, US debt remained an attractive option for investors.
The other two major credit rating agencies, Moody's and Fitch, said on Friday night they had no immediate plans to follow S&P in taking the US off their lists of risk-free borrowers.


Officials in Washington told US media that the agency's sums were deeply flawed.
Unnamed sources were quoted as saying that a treasury official had spotted a $2 trillion [£1.2 trillion] mistake in the agency's analysis.
"A judgment flawed by a $2tn error speaks for itself," a US treasury department spokesman said of the S&P analysis. He did not offer any immediate explanation.
John Chambers, chairman of S&P's sovereign ratings committee, told CNN that the US could have averted a downgrade if it had resolved its congressional stalemate earlier.
"The first thing it could have done is raise the debt ceiling in a timely matter so the debate would have been avoided to begin with," he said.
International reaction to the S&P move has been mixed.
China, the world's largest holder of US debt, had "every right now to demand the United States address its structural debt problems and ensure the safety of China's dollar assets," said a commentary in the official Xinhua news agency.


"International supervision over the issue of US dollars should be introduced and a new, stable and secured global reserve currency may also be an option to avert a catastrophe caused by any single country," the commentary said.
However, officials in Japan, South Korea and Australia have urged a calm response to the downgrade.
The S&P announcement comes after a week of turmoil on global stock markets, partly triggered by fears over the US economy's recovery and the eurozone crisis.


S&P had threatened the downgrade if the US could not agree to cut its federal debt by at least $4tn over the next decade.
Instead, the bill passed by Congress on Tuesday plans $2.1tn in savings over 10 years.
S&P said the Republicans and Democrats had only been able to agree "relatively modest savings", which fell "well short" of what had been envisaged.
The agency also noted that the legislation delegates the lion's share of savings to a bipartisan committee, which must report back to Congress in November on where the axe should fall.
The bill - which also raises the federal debt ceiling by up to $2.4tn, from $14.3tn, over a decade - was passed on Tuesday just hours before the expiry of a deadline to raise the US borrowing limit.


SOURCE (http://www.bbc.co.uk/news/world-us-canada-14428930)

6 August 2011 Last updated at 08:38

[kraznyi_oktjabr]

Magnificent. This is not yet disaster but will prevent some funds from investing to U.S. debt (including one where I have a stake).

Btw Feuer, could you include "Note: x month xxxx last updated xx:xx GMT" into BBC article posts? They have sometimes tendency to update their articles quite often.

WTH what that smiley does there?

[Feuer Frei!]

Btw Feuer, could you include "Note: x month xxxx last updated xx:xx GMT" into BBC article posts?
Done.

[kraznyi_oktjabr]

Done.
Thank you! :salute:

[mookiemookie]

Monday will be an interesting time to watch the markets. Buckle your seatbelts.

[yubba]

How do like that for a Birthday present, Mister President. What's that I smell, well it's not the remnets of beer and pickled eggs nite at the Roxie, more like tar and feathers.

[kraznyi_oktjabr]

How do like that for a Birthday present, Mister President. What's that I smell, well it's not the remnets of beer and pickled eggs nite at the Roxie, more like tar and feathers.
Well... if I remember correctly Standard & Poor's have criticized both sides in Congress.

Inability to make compromises to seriously cut deficit (including stubborn opposition to revenue increases and stubborn opposition to wellfare/healthcare/military/etc. spending) won't make friends in credit rating agencies.

[yubba]

Well he's the leader, and like any good captain he should go down with his ship, the USS Unsubstainable. We don't need to compromise with communist ideas, they don't work anywhere else in the world, and why would you think they would work here, we need to cut the wasteful spending, cut the regulations and let capitalism work, government needs to live within it's means just like the rest of us.

[Feuer Frei!]

and like any good captain he should go down with his ship, the USS Unsubstainable.
:haha:

[STEED]

You only got a slap from S&P, Moody's and fitch have left you on AAA.

[Platapus]

How about we wait and see what the effects of this one reporting change will make before getting upset?

S&P is only one source and they are not infallible. There is already controversy about their methodology being discussed on the news.

[Seth8530]

Of course their is controversy, i bet the white house is on full fledged damage control.. This could have awful effects down the road for all of us, Americans and non Americans alike.

The question is, who else is gona follow their lead?

[Armistead]

Only billions at first, we'll have to see where the other cuts come into play.

[yubba]

Of course their is controversy, i bet the white house is on full fledged damage control.. This could have awful effects down the road for all of us, Americans and non Americans alike.

The question is, who else is gona follow their lead? The gun shop next door has been busy all day, I like where I live It's location, location.

[vienna]

Well he's the leader, and like any good captain he should go down with his ship,...


Just like the valiant Captain George W., who when the ship was seriously taking on water, just waited for his relief and ran down the gangway, never looking back or acknowledgeing he should have done at least something to stop the leaks... :D

[yubba]

Just like the valiant Captain George W., who when the ship was seriously taking on water, just waited for his relief and ran down the gangway, never looking back or acknowledgeing he should have done at least something to stop the leaks... :D Just remember the last 2 years of Captain George W's tour, he had a democrat crew that did nothing about stopping the leaks, but were hell bent in making them worse, and Captain O had 2 years with his loyal crew of democrats, and what happen, they sank under his watch, you are a virtual sub driver, so tell me who's fault is it ??? the guy who left the ship or the one commanding it. The whole problem is no accountablity, not you, not me, and certainly not the one's we elect too represent us, we are so screwed.

[TorpX]

How about we wait and see what the effects of this one reporting change will make before getting upset?

S&P is only one source and they are not infallible. There is already controversy about their methodology being discussed on the news.

I think this was inevitable. Since the Fed refuses to cut spending, it was only a matter of time. What difference does the details of their methodology make? Year after year, the Gov't spends more and more (most of it unwisely), and refuses to change it's way of doing things. The deal Obama signed just sweeps the mess under the rug, so they can all start campaigning for re-election.

[mookiemookie]

I think this was inevitable. Since the Fed refuses to cut spending, it was only a matter of time. What difference does the details of their methodology make? Year after year, the Gov't spends more and more (most of it unwisely), and refuses to change it's way of doing things. The deal Obama signed just sweeps the mess under the rug, so they can all start campaigning for re-election.

The Federal Reserve doesn't control the nation's purse strings. Secondly, the methodology makes all the difference, because that's what the downgrade is based on. I find it curious that S&P arrived at a completely different set of numbers than Moody's or Fitch.

Also, why didn't they wait until the results of the debt reduction committee came in?

[Winston]

This in my opinion is a nice example of financial terrorism. Now that lending is more expensive I'll be interested to see how this will affect home owners, businesses and pensions in the U.S. Sadly I feel it will erode the middle class even more as more businesses go under unable to matian the there debts. More jobs off to China and more poor people in the US.
I fear this is the way some people might want it, goods manufactured in the developing economies while financial and banking 'industries' in the west. If you pay your workers less overseas then theoretically the population benefits from cheaper products.

However who will be left to buy these goods? Manufacturing and farming are down in the UK. 1.2% and I think *0.8% respectivly dispite the disapointing 0.2% Growth reported last fortnight. Hmm I guess the next quarter will be down to and for why? Are there any shortage of resorces? Perhaps a shortage of workers? Well no, nothing like that. Not yet anyway. So what does that leave as the culprit in the failing economies of the west. Globalization is not working and euro is falling apart as the wealth moves away from the developed economies and the smaller economies face the crunch first.

To be frank I don't think there is much anyone can realisticly do in the face of Globalization. Money and investment will move to the most efficient production environments, the developing world. Workers in developed nations will have to except lower pay and fewer rights in order to compete with that. Indeed 'tis the very definition of the word Economy, to produce goods at the lowest price.

In the past western countries would have the benefit of 'the invisible hand' keeping investment home but now with markets so internationalised... It's like investing in renewable energy while there is still coal and oil in the ground, we all know it would help toward energy independence but as long as there is more money in oil and coal we'll go on using it.

[stormrider_sp]

One of the world's leading credit rating agencies, Standard & Poor's, has downgraded the United States' top-notch AAA rating for the first time ever.
S&P cut the long-term US rating by one notch to AA+ with a negative outlook, citing concerns about budget deficits.
The agency said the deficit reduction plan passed by the US Congress on Tuesday did not go far enough.
Correspondents say the downgrade could erode investors' confidence in the world's largest economy.
It is already struggling with huge debts, unemployment of 9.1% and fears of a possible double-dip recession.
The downgrade is a major embarrassment for the administration of President Barack Obama and could raise the cost of US government borrowing.
This in turn could trickle down to higher interest rates for local governments and individuals.


However, some analysts said with debt woes across much of the developed world, US debt remained an attractive option for investors.
The other two major credit rating agencies, Moody's and Fitch, said on Friday night they had no immediate plans to follow S&P in taking the US off their lists of risk-free borrowers.


Officials in Washington told US media that the agency's sums were deeply flawed.
Unnamed sources were quoted as saying that a treasury official had spotted a $2 trillion [£1.2 trillion] mistake in the agency's analysis.
"A judgment flawed by a $2tn error speaks for itself," a US treasury department spokesman said of the S&P analysis. He did not offer any immediate explanation.
John Chambers, chairman of S&P's sovereign ratings committee, told CNN that the US could have averted a downgrade if it had resolved its congressional stalemate earlier.
"The first thing it could have done is raise the debt ceiling in a timely matter so the debate would have been avoided to begin with," he said.
International reaction to the S&P move has been mixed.
China, the world's largest holder of US debt, had "every right now to demand the United States address its structural debt problems and ensure the safety of China's dollar assets," said a commentary in the official Xinhua news agency.


"International supervision over the issue of US dollars should be introduced and a new, stable and secured global reserve currency may also be an option to avert a catastrophe caused by any single country," the commentary said.
However, officials in Japan, South Korea and Australia have urged a calm response to the downgrade.
The S&P announcement comes after a week of turmoil on global stock markets, partly triggered by fears over the US economy's recovery and the eurozone crisis.


S&P had threatened the downgrade if the US could not agree to cut its federal debt by at least $4tn over the next decade.
Instead, the bill passed by Congress on Tuesday plans $2.1tn in savings over 10 years.
S&P said the Republicans and Democrats had only been able to agree "relatively modest savings", which fell "well short" of what had been envisaged.
The agency also noted that the legislation delegates the lion's share of savings to a bipartisan committee, which must report back to Congress in November on where the axe should fall.
The bill - which also raises the federal debt ceiling by up to $2.4tn, from $14.3tn, over a decade - was passed on Tuesday just hours before the expiry of a deadline to raise the US borrowing limit.


SOURCE (http://www.bbc.co.uk/news/world-us-canada-14428930)

6 August 2011 Last updated at 08:38

Maybe S&P finally discovered that the more risky and reckless an investment is, the less Aces+ it should get. :shifty: It still surprises me, after all this mess, how well rated US assets still are.

[Armistead]

The Federal Reserve doesn't control the nation's purse strings. Secondly, the methodology makes all the difference, because that's what the downgrade is based on. I find it curious that S&P arrived at a completely different set of numbers than Moody's or Fitch.

Also, why didn't they wait until the results of the debt reduction committee came in?


I guess they waited to see if congress would get serious about spending cuts. In reality we're just cutting billions, not trillions. I highly doubt when it gets to tough cuts they will follow through.

[Subnuts]

Ah crap.

There goes our roadside assistance! :o

[Seth8530]

This in my opinion is a nice example of financial terrorism. Now that lending is more expensive I'll be interested to see how this will affect home owners, businesses and pensions in the U.S. Sadly I feel it will erode the middle class even more as more businesses go under unable to matian the there debts. More jobs off to China and more poor people in the US.
I fear this is the way some people might want it, goods manufactured in the developing economies while financial and banking 'industries' in the west. If you pay your workers less overseas then theoretically the population benefits from cheaper products.

However who will be left to buy these goods? Manufacturing and farming are down in the UK. 1.2% and I think *0.8% respectivly dispite the disapointing 0.2% Growth reported last fortnight. Hmm I guess the next quarter will be down to and for why? Are there any shortage of resorces? Perhaps a shortage of workers? Well no, nothing like that. Not yet anyway. So what does that leave as the culprit in the failing economies of the west. Globalization is not working and euro is falling apart as the wealth moves away from the developed economies and the smaller economies face the crunch first.

To be frank I don't think there is much anyone can realisticly do in the face of Globalization. Money and investment will move to the most efficient production environments, the developing world. Workers in developed nations will have to except lower pay and fewer rights in order to compete with that. Indeed 'tis the very definition of the word Economy, to produce goods at the lowest price.

In the past western countries would have the benefit of 'the invisible hand' keeping investment home but now with markets so internationalised... It's like investing in renewable energy while there is still coal and oil in the ground, we all know it would help toward energy independence but as long as there is more money in oil and coal we'll go on using it.

Good post, So it seems that for the most part the market itself is capitalistic, to the extent that it will even get in bed with a socialistic economy and workforce just to do exactly what a capitalistic economy wants to do. :doh:

Crazy, but it does make sense... And better yet, the Irony couldnt be better.

[nikimcbee]

Three cheers for obamunism!:yeah::yeah::yeah:

[yubba]

Here's to crowney capitalism, ever wonder why General Electric doesn't pay any taxes ??? {gee Wallie I don't know why,} [ it's not gee it's GE.] If you listen to the tax cheat John Kerry it's the Tea Party's fault for the down grade what a baffoon. jim john what ever

[Respenus]

At least you now know how us Eurozone members feel when one after another, our economies get downgraded, after seemingly no problems for years on end. Of course the Euro "periphery" make quite large mistakes or simply lied about its expenses, yet with the contagion spreading to "core" countries it has become obvious (well it became obvious a year ago) that the wolves are always on the hunt. After they are done with the EU, they'll come looking for someone else (looking at you USA).

As far as globalization is concerned, I am not a major fan of what it has become, but there is only so much that can be done by the companies to cut costs (outsourcing) before they hit a wall. Soon, they will run out of countries with lax labour and environmental to take refuge in.

The major question for me is, why do we then the consumers come back to their products. For the same reasons why loans were so widespread before the crisis and are its root. The "disease" goes far deeper than mere globalization. Just look at what is going on in China and India with their growing middle class and rich individuals. Even in countries that have nothing, the basic human nature remains in full force. Greed and self-interest rule supreme. That's why I've stopped worrying about the global economy right now. I've become convinced of the power of the self-interest of the elites. In order for them to survive, they'll need to stop this madness. In order for them to retain power (formal or no) they'll have to give in to the demands of the people working hard for their daily bread. I'm more concerned about the high possibility that either part of that equation fails and that the powerful go into lockdown, taking everyone else with them. Still optimistic though :yeah:. Can't imagine any other alternative to optimism right now. Perhaps decisive action? :shifty:

[yubba]

I can't wait for the food riots that ought to be interesting.

[mookiemookie]

I can't wait for the food riots that ought to be interesting.

http://myfacewhen.com/images/325.gif

[yubba]

that's what it's going to be like then, marsian law, then something else that I can't spell or remember, and then, an then

[Rockstar]

that's what it's going to be like then, marsian law, then something else that I can't spell or remember, and then, an then


marsain law? martians!? MARTIANS ARE INVADING!? THE MARTIANS ARE COMING HEAD FER THE HILLS!



.

[Tribesman]

marsain law? martians!? MARTIANS ARE INVADING!? THE MARTIANS ARE COMING HEAD FER THE HILLS!


No it is marsian law.
Food riots, that means it is the law of the mars bar, it is a little known fact but marsian law gives the origin of the term as when lawyers get called to the bar:yep:

[kraznyi_oktjabr]

No it is marsian law.
Food riots, that means it is the law of the mars bar, it is a little known fact but marsian law gives the origin of the term as when lawyers get called to the bar:yep::har:

[Armistead]

At least you now know how us Eurozone members feel when one after another, our economies get downgraded, after seemingly no problems for years on end. Of course the Euro "periphery" make quite large mistakes or simply lied about its expenses, yet with the contagion spreading to "core" countries it has become obvious (well it became obvious a year ago) that the wolves are always on the hunt. After they are done with the EU, they'll come looking for someone else (looking at you USA).

As far as globalization is concerned, I am not a major fan of what it has become, but there is only so much that can be done by the companies to cut costs (outsourcing) before they hit a wall. Soon, they will run out of countries with lax labour and environmental to take refuge in.

The major question for me is, why do we then the consumers come back to their products. For the same reasons why loans were so widespread before the crisis and are its root. The "disease" goes far deeper than mere globalization. Just look at what is going on in China and India with their growing middle class and rich individuals. Even in countries that have nothing, the basic human nature remains in full force. Greed and self-interest rule supreme. That's why I've stopped worrying about the global economy right now. I've become convinced of the power of the self-interest of the elites. In order for them to survive, they'll need to stop this madness. In order for them to retain power (formal or no) they'll have to give in to the demands of the people working hard for their daily bread. I'm more concerned about the high possibility that either part of that equation fails and that the powerful go into lockdown, taking everyone else with them. Still optimistic though :yeah:. Can't imagine any other alternative to optimism right now. Perhaps decisive action? :shifty:

I agree, corporate america isn't coming back to the US no matter how many regulations we cut or tax breaks we give them. This is a sad GOP lie regardless of how they to sell it. Under current law and terrible trade policy they will go where they can operate the cheapest. Only way they would come back here is return to laws of the 50-80's or americans agree to work for $2 per hour with no protections.

I imagine China and India will progress as we did. As their economies grow they will slowly demand higher wages, workers rights, etc. However, this process took 50 years min here in the US. The other issue is the global economy, why they build cheap there, the money is made selling it back here, so as the US economy fails, a large part of their market will fail.

It appears globalization is likened to aliens movies, where they invade, use all the earths resoures then move on. Corporations will do the same, because they really only work for themselves now, they don't care about nations, they will always seek somewhere cheaper. It will be the eventual ruin of the US economy and given time their ruin.

One just needs to look back when laws and regs made corporate america work for america, we built the strongest middle class in the world under strong regulations and tax codes, now the few elite are gaining all the wealth.

[flatsixes]

One just needs to look back when laws and regs made corporate america work for america, we built the strongest middle class in the world under strong regulations and tax codes, now the few elite are gaining all the wealth.

Just a reminder, folks, corporations are owned by a host of different entities: individuals, other corporations, institutions, university endowments, hedge funds, mutual funds, pension funds, your 401K, investment clubs, non-profits, grandma's church. Not all of these entities are "American," either.

"Strong regulations" never "built" anything but paperwork factories. The job of regulations is to prevent public harm, not grow things.The tax codes are a sieve. I find myself open to the idea that cutting the tax rate on corporations to 0% would close 90% of those holes. Let those who profit from corporate earnings pay the tax on those earnings, just like partnerships, s-corps and other "pass through" entities.

Just a thought.

[mookiemookie]

"Strong regulations" never "built" anything but paperwork factories.


And lax regulations have sure destroyed a lot of things.

[STEED]

I heard on the news today, Moody's is now thinking about a possible downgrade and if this happens I hate to think of the effect it will have on you in America.

[kraznyi_oktjabr]

I heard on the news today, Moody's is now thinking about a possible downgrade and if this happens I hate to think of the effect it will have on you in America.
Do you have link to news article? Would be nice to read.

[AVGWarhawk]

Just a reminder, folks, corporations are owned by a host of different entities: individuals, other corporations, institutions, university endowments, hedge funds, mutual funds, pension funds, your 401K, investment clubs, non-profits, grandma's church. Not all of these entities are "American," either.

Yes, like China!

I heard on the news today, Moody's is now thinking about a possible downgrade and if this happens I hate to think of the effect it will have on you in America.


Repeat after me, "Toast."

[STEED]

Do you have link to news article? Would be nice to read.

It was on the radio.

[mookiemookie]

Do you have link to news article? Would be nice to read.

http://www.reuters.com/article/2011/08/08/us-usa-ratings-idUSTRE7774J820110808?feedType=RSS&feedName=topNews&rpc=71

[STEED]

http://www.reuters.com/article/2011/08/08/us-usa-ratings-idUSTRE7774J820110808?feedType=RSS&feedName=topNews&rpc=71

Glad some one here found something on it. :up:

My general look around the net comes up with Moody's now and again threatening but no action. Now S&P has this may or may not result in Moody's doing anything.

[yubba]

Barrack o lips, dow down more than 600 points.

[mookiemookie]

If you actually read the S&P report, it specifically calls out the political climate in Washington as being the main reason why they downgraded. The U.S.' financial situation is one of the most scrutinized and widely studied set of numbers in the world, and S&P wasn't going to find anything earth shattering that we didn't already know in that arena. And furthermore, a country isn't like a company. It's in no danger of not being able to pay its debts, as the Fed can print as much money as is necessary, but the issue is the willingness to pay its debts. And that willingness was put in jeopardy by the idiots in Washington with their brinkmanship, the way that politicians were using the threat of default as a way to score political points on the other side. The U.S. credit system runs on trust - trust that the government is going to pay its bills. When that trust is rattled, as the politicians did in this fiasco, then you see the results we have today. A downgrade.

The fool Mitch McConnel said that they're going to do the exact same thing next time the debt ceiling comes up. God help us all.

[AVGWarhawk]

Invest in 401K and invest in your retirement! :down:

Any gains in the last 2 years....POOF....gone....:down:

[mookiemookie]

Invest in 401K and invest in your retirement! :down:

Any gains in the last 2 years....POOF....gone....:down:

Already reallocated last week. :|\\

[STEED]

Invest in 401K and invest in your retirement! :down:

Any gains in the last 2 years....POOF....gone....:down:

Bloody heck. :o

[AVGWarhawk]

Bloody heck. :o

This drop is just like 2008. Took a bath then and now. :down:

[Skybird]

I see this current chapter- more it is not: it's just one chapter in a much longer novel - two-sided. The good news is, that since last week at the latest markets were expecting the downgradinging, and tried for the most to prepare. That'S why it has not become the big black Monday panic like Black Friday. That'S the good news. The bad news is that since these types of major panics come from the market not being prepared, this means that the real meltdown we need to expect and thzat people talk about - will come more or less out of the blue, at a surprising pace and opportunity, unfolding with a speed against which no preparation is possible and no reaction will be able to keep up with. And when the current events already hurt althoiugh we have been able to forsee the treiggering event - then maybe you can imagine what the real big thing will feel like.

The system is rotten, sick and insane. I see a major meltdown as inevitable - the question is not if, but when. And as I just argued above: we will not be able to calculate it in advance. We know it is coming, but the precise point of time still will catch us by surprise, adding to the damage then.

The ECB has again started to buy bonds - this time Spanish and Italian ones. But the Greek bonds it has bought 4 months ago already are greater than the ECB's actual liquidity- go figure. France has come under a massive speculation attack since last week.

It's all madness going on, and nobody wants to realise that we need to reboot from cold&dark, and with a complete new rule set, and plenty of head-chopping first. And the self-declared elites having brought us into this situation over the years and decades, still are left in place and still even get voted for.

I just can do this: :nope:

[flatsixes]

It's all madness going on, and nobody wants to realise that we need to reboot from cold&dark, and with a complete new rule set, and plenty of head-chopping first.

Whoa. Um, thanks but no thanks.
I've seen that movie. It doesn't end well for most.

[mookiemookie]

The system is rotten, sick and insane. I see a major meltdown as inevitable - the question is not if, but when. And as I just argued above: we will not be able to calculate it in advance. We know it is coming, but the precise point of time still will catch us by surprise, adding to the damage then.

Just wait until Bank of America (possibly) goes bankrupt later this week. It'll be 2008 all over again.

[Platapus]

At least I will be able to buy more shares in the near future. That will help out a lot when the economy recovers.

I do feel for those too close to retirement where they can't wait the economy out. That must suck.

[yubba]

aaaawwww this sucks, thank you, may I have another:damn: think I'll jump into the IXB and blow something up.

[AVGWarhawk]

At least I will be able to buy more shares in the near future. That will help out a lot when the economy recovers.

I do feel for those too close to retirement where they can't wait the economy out. That must suck.

Exactly! I'm of age I can recover, but for crying out loud, how much would I have had if I did not have to recover over and over? There are many at or near retirement that can not as a result of the false faith in the stock market. This was sold to the public as a viable means to grow a retirement fund. In short, we have been hoodwinked. Companies abolished pension plans because after all we can invest making our own retirement. I believe we are working towards a generation that will not financially be able to retire. Welcome to becoming a ward of the state.

[Torplexed]

The ECB has again started to buy bonds - this time Spanish and Italian ones. But the Greek bonds it has bought 4 months ago already are greater than the ECB's actual liquidity- go figure. France has come under a massive speculation attack since last week.

So, basically institutions we can't trust bailing out institutions we've lost faith in.

Beginning to wonder if it's time to start investing in dog food futures.

http://static.guim.co.uk/sys-images/Guardian/Pix/pictures/2008/10/09/mad_max460.jpghttp://media3.teenormous.com/items/ih2.redbubble.net/work.2449441.2.fc-550x550-white.v3.jpg

[Armistead]

"Strong regulations" never "built" anything but paperwork factories. The job of regulations is to prevent public harm, not grow things.The tax codes are a sieve. I find myself open to the idea that cutting the tax rate on corporations to 0% would close 90% of those holes. Let those who profit from corporate earnings pay the tax on those earnings, just like partnerships, s-corps and other "pass through" entities.

Just a thought.

You obviously don't understand personal tax income and corporate tax income. If we cut the tax code to 0% they would still use that extra profit to build and hire where they can make more profits. In all, US corps pay lil corporate tax, they hide most of it in foreign shelters, right now about 3 trillion bucks worth.

Strong regulation had lil to do with building factories, allowing corps to move overseas, poor trade laws, etc..is the problem. If you can't move overseas and hide your money in shelters you learn to work and make profit where you are.

The last tax holiday, what did corps do, used it to invest in stock and move more jobs overseas, they promised more jobs, but in fact they laid off workers. Now that we know the last lie, another congressman is saying give them another holiday with a 0 tax rate, but they must invest 25% in hiring americans and buying american equipment. That may work, but it would mean government getting involved to pass laws to make sure they invested that way, instead of the usual, we trust you to do the right thing....right..

[Armistead]

Exactly! I'm of age I can recover, but for crying out loud, how much would I have had if I did not have to recover over and over? There are many at or near retirement that can not as a result of the false faith in the stock market. This was sold to the public as a viable means to grow a retirement fund. In short, we have been hoodwinked. Companies abolished pension plans because after all we can invest making our own retirement. I believe we are working towards a generation that will not financially be able to retire. Welcome to becoming a ward of the state.

401's were never meant to be retirement plans, but later laws reworked that allowed them for the lower classes. Basically giving big stock companies a chance to thrive off your buck. You might make money, you might lose it all, scary way to plan retirement as many have found out.

[Platapus]

I believe we are working towards a generation that will not financially be able to retire. Welcome to becoming a ward of the state.

Or we will just continue to work until the day we die. :shifty:

But I fear that you may be right. The concept of retiring in leisure may not apply to my generation.

[AJ94CAP]

The ****-ups of the past few decades are really catching up with us in the US and around the world. The US is slowly but surely coming back to what it was before the American Century. Or at least that's what it would seem. I must say, I am terrified of what the next 50 or 60 years will bring this world, because for the past decade, things haven't been going too hot.:shifty: This is what happens when you outsource virtually every industry except agriculture which obviously must be done here for it to be US agriculture. The auto industry is a shadow of what it once was, technology is moving to Asia, and it's been a while since I've bought something that didn't have a "Made in China" tag on it.:nope: Globalization is a mistake.

[gimpy117]

well, we are truly becoming a 2 class society. Look for much "eating of cake" in the next few decades

[Winston]

To continue the previous post I'd like to talk briefly and just about money and how it works in our economic system. One of the most fundamental concepts is to understand all money is loaned in to existence by private banks. Every time someone takes out a loan or mortgage that money is simply written in to existence right there and then, with the borrowers promise to pay as the only collateral against the debt, plus the interest on the loan to be repaid at a later date.


This system has advantages of its own. Money is easy to come by for almost anything and thus capital is available for all sorts of economic expansion. If the economy is growing year by year then people find they have to money to pay back the loans and the interest when the time is due. However, when the economy slows these debts catch up with people as they have less money to pay and the added pressure of the interest sends people and business under. Banks stop lending as more debts pile up resulting in a credit crunch you might say. For the sake of brevity and remaining on the topic of money creation I don't want to talk about the credit crunch right now, maybe a later post. However these fanatical disasters are much more complex this.


Now lets look at the opening concept again and how all money, even the money you have in the bank is just debt. First we need to understand the fractional reserve banking system and how it makes possible the creation of new money. Though this system the amount of real wealth backing the dollar has shrunk to almost nothing.
Banks have what's called fractional reserve requirements, witch is to say for every one Dollar of real wealth they hold they can lend out ten Dollars to prospective borrowers. However over the years the fractional reserve requirements have lowered enabling banks to lend more money thus expanding the money supply. It is in fact, almost licence to print money leading to inflation and a reduction in the buying power of the Dollar.*

The Federal reserve is what's known as a lender of last resort, it to has fractional reserve requirements and lends out its capital to other banks. These banks in turn view this loans as if they were as good as gold and thus a federal reserve loan can satisfy the fractional reserve requirements of these banks. In conclusion we can see that this sort of system very vulnerable to market crisis, as to maintain it the economy has to grow year on year.
Still we have not factored in the interest payments on all this lending that goes on between banks and individuals and other banks. Remember the only way money can come in to existence to to be lend to someone by a bank so how can interest payments be met? Ultimately they can't and this system is geared so that some will always fail. I also don't see how this system can survive in the face of dwindling resources but I think that's a post for another time.


I think that economics should be taught in schools along side science and maths. Every citizen of a country should have at least a basic understanding of this. I can see why it's not on the curriculum, they need us just smart smart enough to push a few buttons but not to understand how the world works. Politics has become almost meaningless in my opinion, as no one is going to bite the hand that feeds them. I urge anyone who wants to spend a little time looking in to this subject if you have time, it's well worth the study.




*Reduction in the buying power combined with higher commodity prices means wages need to go up to keep the economy running as we all want it to. Bailing out banks does nothing to alleviate this, in fact it makes it worse.

[AVGWarhawk]

401's were never meant to be retirement plans, but later laws reworked that allowed them for the lower classes. Basically giving big stock companies a chance to thrive off your buck. You might make money, you might lose it all, scary way to plan retirement as many have found out.

Then what do we have? IRA that companies do not offer. Pension plans? Not one the table anymore. However, companies will sponsor a 401k retirement program. So never meant to be a retirement program means nothing. It has become one! Either way the potential to loose any gains is present. Even the potential to loose the original investment. It is unfortunate the USA allows this type of risk taking on a retirement plan but provides very little help to the individual when the market goes belly up. We get an answer of better smarter investing next time. As for me, my portfolio is set up for conservative investing and monies spread over several options and a few in foreign funds. In short, diversified. This helps in situations like this but I still take some what of a beating. I think I might start hiding cash in the mattress!

[kraznyi_oktjabr]

... I think I might start hiding cash in the mattress! You know what is a dream scenario for your United Mattress Saving & Loans Bank (http://www.youtube.com/watch?v=L6qa54mzRb0)? :DL

[Winston]

If you're looking for a save haven, gold has some legs yet. Silver is very good to, up 70% last year and about 30% so far this year and an easier investment to boot. Do take delivery of the metal though, keep it save for those rainy days we all know are coming.


But don't take my advice, do research first. I'd recommend U.S. silver eagles or Canadian silver Maples. Edit: Not for the uk though, sodding vat 20% on coins that should be removed makes this a slightly less profitable action however the silver price will exceed this in a few months.

[Skybird]

I have recommended gold myself over the past years, until some months ago, but I do not do that anymore: the price for it is too high now. Gold always has a fluctuating price, in all history, and it is currently spiking, which means sooner or later it will fall, and it will fall steeply. Then your losses will be stellar if your evasion timing is not perfect.

It simply is too late to buy gold now, me thinks.

If you bought it some years ago, then keep it as a safety, do not sell it as a quick way of making profit - what would you get for it? Uncertainty only. Even if the price drops again, sine you bought it much cheaper, you will not suffer losses.

I bought a little ammount of gold years ago, when the price was between 400 and 500. I see it as a last defence line in case of absolute emergency or chaos. Back then, some in this forum were laughing when I said I could imagine the price going up to 1500, even 2000 and maybe more. :O: Who is laughing now? :O: :D

Sorry. Couldn't resist. :)

[AVGWarhawk]

Gold, like anything else, is only worth what someone is willing to pay for it. Back in the good old days of panning the rivers for a speck of gold is much different than today's panning of the polluted river for gold. At the rate we are going soon we will be like the old west. Bartering for goods and panning for gold.

[Winston]

Maybe, I still think it's got legs. The market for these types of defensive investments will continue to rise. As I said, most importantly it's a save haven to protect your self in case of the worse case scenarios and as such it's good to have some tucked away. It's something each one should look at from them selves. I'm going to put it on the line and say gold will hit $1900 at years end and $2000 mid February next year and will continue to rise there after as it has been doing. The reason is as I've already talked about in previous posts, that paper money is in a massive bubble. It's only a matter of time until it pops in the face of dwindling resources. It's going to happen, but not today. I could be wrong only time will tell...



I'm no expert but I think one of the major problems is that banks basically print money. Many years ago money was backed by gold reserves and thus had actual value. Banks started lending out more than they had in the volts. First twice as much, then three times and so on until today where every time you take out a lone the bank types in a number in to a computer.


Say you wanted a $10,000 lone for a car. You head down to your bank and talk to your friendly bank manager and he happily hands over the money. Now a lot of people assume that he has lent you money that the bank keeps in it's volt, money that savers keep in the bank. However this is not the case. The bank has just created the money when it added the $10,000 to your bank account. Before this time this money did not exist in the economy and there is nothing to back it's value.


Because banks can create money like this they can lend when every they want. It's easy for almost anyone to get credit from there banks and buy the things they want. The problem is this debt is never paid off, it's just past around. Lets take that $10,000 once more. You've paid the second hand car dealer he uses the money to pay for parts, cars and wages and thus the money that was created gets out in to the economy. As you can see every time the bank creates money in this way it leads to inflation as there are more Dollars floating around the economy leading to a devaluation of the currency. This will lead to an inevitable credit crunch where there it just to many dollars making them more and more worthless.


Yahoshua is on to a good idea when he says to invest in some gold. Gold will always retain monetary value and thus investing in some will protect you should currencies around the world collapse. I myself am looking in to this at the moment. I'd recommend people have a look in to how banks work and how money is crated for them selves. I think it's a very important issue.

I back the idea on gold - the small reserves I have, are in solid gold, no "Kaufoptionen" (buying options?). tjhe latter is a oiece of paper only,.and when there is no gold on the market, your paper is useless.

However, gold is expensive currently. On the other hand, althoiugh it traditonally is an up and down for gold, in the face of raising inflation and finacial troubles and the stockmarkets being in doubt, gold maybe never will be at historical low prices anymore anyway.

But in principle: if you want a reserve, yes, go for gold indeed. It also is not immoral, like holding shares is. I admit that also has been an argument for me. If you buy gold, it is deal done-deal over, you bought something, and now it is your property, period. If yoiu buy shares, you claim the right to constantly get payed from the work of other peoiple, who additionally often get pushed and kicked and are put under pressure to increase the profit for shareholders at the end of the year, and maybe even loose their jobs for that argument. Sicne shareholders do not give back anything in return, only bear the risk of eventually loosing the money they spend in shares, profits should be limited to a total of what is equivalent to the money they spend when buying, then the share should be deleted, maybe plus a return equivalent to the interest for leadning money. And that, of course, would make the whole system of shareholding absurd.

Yes, the system of shareholding is absurd indeed. It should be allowed to hold shares only of the copmpany you are working for, eventually. But not for companies that you have nothing to deal with. Then you do not work for stranger's profit, but for your own success. You have a justified self-interest in the company'S success. If foreigners hold your shares, you partially are being possessed by them, like a master owns a slave whom he owes nothing, but benefits from.

Uh, I'm hijacking this. Sorry.

I was looking back though my old posts as I thought that I had posted something about this before back in 2007 and that's You Skybird, hope you don't mind the quote from the past. I never laughed at you back then my good man. In fact you were another voice in my awakning. I got to say it's funny how things never really change. Still always have a plan and always be learning. My understanding has grown since then but I still don't know what the future will bring. Anyone who says without equivocation what will happen tomorrow is a fool.

EDIT :I suck at quoting things

[Armistead]

Then what do we have? IRA that companies do not offer. Pension plans? Not one the table anymore. However, companies will sponsor a 401k retirement program. So never meant to be a retirement program means nothing. It has become one! Either way the potential to loose any gains is present. Even the potential to loose the original investment. It is unfortunate the USA allows this type of risk taking on a retirement plan but provides very little help to the individual when the market goes belly up. We get an answer of better smarter investing next time. As for me, my portfolio is set up for conservative investing and monies spread over several options and a few in foreign funds. In short, diversified. This helps in situations like this but I still take some what of a beating. I think I might start hiding cash in the mattress!

Your cash has just as much value in the mattress as it does the bank so why not.

That's the danger of stocks, stocks aren't real value. Last downfall they say we lost trillions, so where did the money go, no where, it was the assumed value at the time, nothing real.

The danger of most 401's are workers are forced into options and usually can only change that option a few times a year. That really sucks, factors show the market is gonna fail and you can't sell when needed. All you can hope is the ones investing for you do the right thing, but more than not they take high risk, because it's your money.

[Winston]

I fear Armistead that when currency is treated as a commodity then it to fluctuates in value just like anything else. If you were to take a hundred Dollar bill and walk in to the fed you could not exchange it for it's value in gold. The only thing backing the currency is the fact that by law 'This note is legal tender for all debts, public and private.' If you wanted to buy a cake from McDonalds say, they can not refuse your money even though it's fiat currency. Remember the Fractional reserve system I talked about previously. Take out the cash from the bank and put it in a suitcase, say $1,000,000. Well there still just bank notes, paper. Those same bank notes are affected by inflation just like the trillions upon trillions of digital Dollars that are floating around the system.
The financial system as a whole needs to be rethought.
Ron Paul talks about going back to a gold standard, that by basing the Dollars value on gold reserves it would give it stability. No doubt it would but gold can be manipulated to. Another solution I hear is for the government to issue money so that it matches the size of the economy. Each year 'x' amount of Dollars to match 'y' the size of the economy as reported by private industry, government expenditure etc...
I have no idea if ether will work or if there is another solution to attain stable money. I just know it would be nice if people were not having to worry about there savings disappearing down a hole.

[flatsixes]

You obviously don't understand personal tax income and corporate tax income.

You may be correct. I've only been practicing corporate law for a few decades. Still, I think the rest of your argument (such as I can understand) makes a good case for abolishing the corporate income tax and taxing the beneficiaries directly, which was my point.

[AVGWarhawk]

Your cash has just as much value in the mattress as it does the bank so why not.

That's the danger of stocks, stocks aren't real value. Last downfall they say we lost trillions, so where did the money go, no where, it was the assumed value at the time, nothing real.

The danger of most 401's are workers are forced into options and usually can only change that option a few times a year. That really sucks, factors show the market is gonna fail and you can't sell when needed. All you can hope is the ones investing for you do the right thing, but more than not they take high risk, because it's your money.

In a sense, yes, it was only a paper loss concerning stocks. As far as forced, I do not have to contribute to my 401K but knowing myself I do not have the discipline to do it on my own. Therefore I elect to have money taken each week. My portfolio is handled by folks that specialize in 401K. They are paid for their service. I get monthly reports and any switching of funds. All of my stocks are conservative in nature. Aggressive stocks and aggressively grow or aggressively lose as well.

[AVGWarhawk]

WTH? Now the market swings upward 425 points. :har:

[Winston]

http://money.cnn.com/2011/08/09/technology/amazon_riot/index.htm

Even with the fall of civilisation there's always some one making a profit :woot: