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S&P to downgrade US credit rating?
Comments
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It doesn't help S&P credibility that they can't add up. According to the US govt, the calculations they based this rating on were wrong by 2000 bn dollars. http://ftalphaville.ft.com/blog/2011/08/06/645291/s-us-still-on-aaa/ they seem to have gone ahead with the ratings change despite the fact they really don't seem to know what they are doing.
“The ideas of debtor and creditor as to what constitutes a good time never coincide.”
― P.G. Wodehouse, Love Among the Chickens0 -
As an aside, I'm astonished that ratings agencies still exist or are given any credibility whatsoever, since their utter failure to accurately rate toxic debt was a key factor in the mess we're in. They literally could not have got it more wrong, giving Triple A ratings to debt that in many cases turned out to be literally worthless. IMO they have as much credibility as astrologists.0
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As an aside, I'm astonished that ratings agencies still exist or are given any credibility whatsoever, since their utter failure to accurately rate toxic debt was a key factor in the mess we're in. They literally could not have got it more wrong, giving Triple A ratings to debt that in many cases turned out to be literally worthless. IMO they have as much credibility as astrologists.
Yes, they are trying to restore credibility by puffing out their chest now, a sad bunch.In a statement, the US Treasury said: "A judgment flawed by a £1.2trn ($2trn) error speaks for itself."'Just think for a moment what a prospect that is. A single market without barriers visible or invisible giving you direct and unhindered access to the purchasing power of over 300 million of the worlds wealthiest and most prosperous people' Margaret Thatcher0 -
It doesn't help S&P credibility that they can't add up. According to the US govt, the calculations they based this rating on were wrong by 2000 bn dollars. http://ftalphaville.ft.com/blog/2011/08/06/645291/s-us-still-on-aaa/ they seem to have gone ahead with the ratings change despite the fact they really don't seem to know what they are doing.
You wouldn't want to be the person that cocked that up would you? we have all made the odd faux pas, some more than most, but this one could make it into the economic history books :eek:'Just think for a moment what a prospect that is. A single market without barriers visible or invisible giving you direct and unhindered access to the purchasing power of over 300 million of the worlds wealthiest and most prosperous people' Margaret Thatcher0 -
The problem really is what happens from here. For example, what is the safe haven now, the risk free asset? EUR? CNY? JPY? They all have problems attached. Gold?
Ironically, the safe haven will almost certainly remain the dollar.
Nothing else is big enough to absorb the capital flows without destabilising, and thus no longer remaining a "safe haven".
Probably also worth pointing out that the average difference in price between AA and AAA debt is only around 0.7%, but that some AA countries, like Japan, can pay less for debt than some AAA countries, so it's not clear cut.
But yes, the downstream effects will be most interesting to watch.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
Maybe some of those fund managers will actually realise there is no such thing as a safe haven!
A return to risk wouldn't be a bad thing after all.0 -
Maybe some of those fund managers will actually realise there is no such thing as a safe haven!
A return to risk wouldn't be a bad thing after all.
Getting some of that vast pool of liquidity that is currently unproductively parked in "safe havens" back to work in the credit markets would be a very good thing.
I don't think a single agency downgrade will be enough to do that though.
If all three agencies dropped the US AAA rating, it's difficult to see where else is big enough to absorb that amount of liquidity safely, so a return to risk would almost happen by default.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
How long before Mr Ca-Ching's debt collectors descend on the Whitehouse.0
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Apparently Fitch is checking its figures and will have a reassessment by the end of August, so it is possible they too will downgrade the US.0
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