S&P to downgrade US credit rating?

StevieJ

dandy-candy wrote: »

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.

I thought it was S&P checking their figures, havn't they lost 2 Tril somewhere?

StevieJ

Debt Ratings.

USA AA+

Isle of Man AAA

Nice one Douglas

Generali

StevieJ wrote: »

I thought it was S&P checking their figures, havn't they lost 2 Tril somewhere?

Yes they have but they insist that their downgrade stands.

The USA has, from memory, $145,000,000,000,000 (one hundred and forty five trillion dollars) in unfunded liabilities including pensions, Medicare and Medicaid. $2,000,000,000,000 is little more than a rounding error although embarrassing admittedly.

Thrugelmir

hallmark wrote: »

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.

Lehmans committed fraud. As did AIG. If the auditors didn't detect it what chance the credit rating agencies.

Best to keep matters in perspective.

StevieJ

Generali wrote: »

Yes they have but they insist that their downgrade stands.

The USA has, from memory, $145,000,000,000,000 (one hundred and forty five trillion dollars) in unfunded liabilities including pensions, Medicare and Medicaid. $2,000,000,000,000 is little more than a rounding error although embarrassing admittedly.

But they were looking for $4 tril in cuts to hold the rating, The US have agreed $2.4 tril, a fat finger of 2 trillion suddenly becomes more relevant in that context, depending on where it was.

Lawmakers agreed on Aug. 2 to raise the nation’s $14.3 trillion debt ceiling and put in place a plan to enforce $2.4 trillion in spending reductions over the next 10 years, less than the $4 trillion S&P had said it preferred.

dandy-candy

Here's links mentioning Fitch

"Earlier this week, the other two major credit rating agencies, Fitch and Moody's, reaffirmed their versions of AAA ratings after the end of the debt ceiling fight. But Fitch also said it was keeping its US rating under review until the end of August." ( http://www.guardian.co.uk/world/richard-adams-blog/2011/aug/06/us-credit-rating-downgrade-debt)

"Fitch similarly reiterated its AAA rating on Tuesday, but noted that it would have a fuller reassessment by the end of August. Fitch also emphasized the need for further fiscal adjustments." (http://seekingalpha.com/article/285308-5-things-you-should-know-about-the-s-p-downgrade)

pqrdef

At this point, I'd like to be China. If I were China, I'd use the excuse of the downgrade to start selling off some of my $4trn+ of US Treasury bills, and I'd buy PIIGS bonds instead. I'd buy enough to save the eurozone from itself, and then I'd be calling the shots in Europe.

Well they're calling for a new global reserve currency. What else is big enough?

Wookster

pqrdef wrote: »

At this point, I'd like to be China. If I were China, I'd use the excuse of the downgrade to start selling off some of my $4trn+ of US Treasury bills, and I'd buy PIIGS bonds instead. I'd buy enough to save the eurozone from itself, and then I'd be calling the shots in Europe.

The Chinese are the big hypocrites in all of this. They maintain their currency at an artificially low exchange rate giving them an unfair advantage over most other countries.

*not suggesting that a free floating Yuan will solve all the US' problems but it would help.

geneer

Wookster wrote: »

The Chinese are the big hypocrites in all of this. They maintain their currency at an artificially low exchange rate giving them an unfair advantage over most other countries.

*not suggesting that a free floating Yuan will solve all the US' problems but it would help.

Because China and the other eastern economies were previously ravaged by wallstreet and the IMF.

China vowed to never let it happen again.
And boy did they come up with an effective plan.

tomterm8

It's not easy just to sell $4trn+ of treasury bonds. If they tried, they would tank the dollar. Which would mean their economy couldn't export to America any more. Which would plunge them into a recession.

In functional terms, China would be cutting its own throat, and the odds are it would have to sell the debt at a deep discount.