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

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 xxx GMT" into BBC article posts? They have sometimes tendency to update their articles quite often.

WTH what that smiley does there?

[Feuer Frei!]

Originally Posted by kraznyi_oktjabr

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

Done.

[kraznyi_oktjabr]

Originally Posted by Feuer Frei!

Done.

Thank you!

[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.

[stormrider_sp]

Originally Posted by 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

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. It still surprises me, after all this mess, how well rated US assets still are.

[nikimcbee]

Three cheers for obamunism!

[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 . Can't imagine any other alternative to optimism right now. Perhaps decisive action?

[yubba]

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

[mookiemookie]

Originally Posted by yubba

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

[Armistead]

Originally Posted by 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 . Can't imagine any other alternative to optimism right now. Perhaps decisive action?

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.