S&P cuts ratings outlook for the US of A

Mr_Mumble

FTSE-100 currently down 1.9%, gold & silver are up.

· Because the U.S. has, relative to its ‘AAA’ peers, what we consider to be very large budget deficits and rising government indebtedness and the path to addressing these is not clear to us, we have revised our outlook on the long-term rating to negative from stable.

· We believe there is a material risk that U.S. policymakers might not reach an agreement on how to address medium- and long-term budgetary challenges by 2013; if an agreement is not reached and meaningful implementation does not begin by then, this would in our view render the U.S. fiscal profile meaningfully weaker than that of peer ‘AAA’ sovereigns.

Plenty more at FTAlphaville.

chucky

Mr_Mumble wrote: »

S&P cuts ratings outlook for the US of A

that Labour reckless spending and Gordon Brown printing money has a lot to answer for!!

michaels

Are the printing presses broken? Are they running out of paper or ink? Otherwise how can the US default on dollar liabilities?

Is this the same rating agency that was willing to give housing CDOs a triple A rating?

Thrugelmir

michaels wrote: »

Are the printing presses broken?

Seems even the President has had a change of tune. Recently quoted as saying :

"Our debt has grown so large that we could do real damage to the economy if we don't begin a process now to get our fiscal house in order".

edinburgher

Boo! ISA crash time.

Well, not a crash as such, but maybe the QE hangover is starting to kick in for the US?

Mr_Mumble

michaels wrote: »

Are the printing presses broken? Are they running out of paper or ink? Otherwise how can the US default on dollar liabilities?

If it got to that extreme stage policymakers may/should choose default (perhaps selective*) over printing. Congress can stop the Fed. The choice in that scenario is default hardship or hyper-inflation, doubt creditors care either way they're still stuffed.

*A big problem with US debt in a crisis scenario is the $4.6tn notionally owned by the social security system. Why wouldn't populist politicians 10-20 years hence protect the social security fund at the expense of other creditors? Of course this debt should be treated equally as part of the $14.3tn, current, total debt... but then Freddie and Fannie were not supposed to be backed by the US government. Politicians break all the rules in crisis situations. The Icelanders were terrorists!

Is this the same rating agency that was willing to give housing CDOs a triple A rating?

Well, they all were

Thrugelmir

edinburgher wrote: »

Boo! ISA crash time.

Well, not a crash as such, but maybe the QE hangover is starting to kick in for the US?

The ability to fund the budget deficit more like. QE merely papered over the cracks by buying back Treasury paper.

edinburgher

The ability to fund the budget deficit more like

Absolutely - there does seem to have been a real suspension of disbelief in that part of the world of late.

dunstonh

I just saw the headlines saying markets plunge and thinking the worst I took a look and say only 1-2% knocked off.

Since when was 1-2% is considered a plunge?

HAMISH_MCTAVISH

dunstonh wrote: »

Since when was 1-2% is considered a plunge?

Clearly you just don't understand Forumnomics....

Loughton_Monkey

dunstonh wrote: »

I just saw the headlines saying markets plunge and thinking the worst I took a look and say only 1-2% knocked off.

Since when was 1-2% is considered a plunge?

Well if you follow the same 'logic' of all these idiots who analyse house prices, this is equivalent to armageddon! Just wait and see. These people will be having FTSE down to 2,500 by June!