U.S. Treasury Bonds loses AAA credit rating (S&P)

[houndawg]

S&P? We talkin' 'bout the same S&P that gave AAA ratings to shitty securities that helped create this whole mess?

I asked the same question on the default thread a week ago.

I agree that a country with a national debt exceeding 100% of GDP certainly shouldn't have a top credit rating.

On the other hand, if these ratings agencies proved themselves to be so bad in 08', why does anyone still pay attention to them if they are so flawed? Why not just ignore them?

That's what I do..

[JMU DJ]

I'm not an economist.... nor have I been paying terribly much attention to the outside world recently (Casey Anthony, not guilty??? WTF?)... but can someone explain to me why this occurred? Is it because the raise in the debt ceiling in correlation with spending cuts wasn't sufficient enough? Also, I've noticed I have many Tea Party friends who are screaming their heads off today about this and proclaiming that this is Barry/Ninny Pelosi/Entrenched Rino's Fault that we lost the AAA credit rating.... however, I recall many of them as well as Tea Party leadership decrying that they would accept the ramifications of defaulting if it meant creating a better country. Obviously we didn't default, but still lost credit rating... so why are they so upset? Is it the poor debt deal? Was it the arduous, long drawn out discussion, which lead to a midnight hour deal? I mean, they were ready to default and lose credit rating anyway, right?


I don't know...

[OL FU]

I'm not an economist.... nor have I been paying terribly much attention to the outside world recently (Casey Anthony, not guilty??? WTF?)... but can someone explain to me why this occurred? Is it because the raise in the debt ceiling in correlation with spending cuts wasn't sufficient enough? Also, I've noticed I have many Tea Party friends who are screaming their heads off today about this and proclaiming that this is Barry/Ninny Pelosi/Entrenched Rino's Fault that we lost the AAA credit rating.... however, I recall many of them as well as Tea Party leadership decrying that they would accept the ramifications of defaulting if it meant creating a better country. Obviously we didn't default, but still lost credit rating... so why are they so upset? Is it the poor debt deal? Was it the arduous, long drawn out discussion, which lead to a midnight hour deal? I mean, they were ready to default and lose credit rating anyway, right?


I don't know...

I believe S&Ps position all along has been the trend of the deficit and now they fact that the debt ceiling agreement did nothing to change that trend.

Just hard to take it seriously from (i) blind or (ii) ignorant or (iii) corrupt or (iv) incompetent assholes. If they had any decency they should have recused themselves from public statements for at least 10 years.

[Ivytalk]

I wonder if S&P will stand its ground if its competitors stick with AAA.

Will be interesting to see how the U.S. bond market reacts on Monday. I don't care about the Asian markets.

For all those who say we should throw out all 535 (537?) of the bums, bear in mind that if we ended up with the obverse of where we are today -- a GOP Senate and White House, and a Dem House -- we'd still have gridlock. America gets the government it deserves.

[BlueHen86]

I wonder if S&P will stand its ground if its competitors stick with AAA.

Will be interesting to see how the U.S. bond market reacts on Monday. I don't care about the Asian markets.

For all those who say we should throw out all 535 (537?) of the bums, bear in mind that if we ended up with the obverse of where we are today -- a GOP Senate and White House, and a Dem House -- we'd still have gridlock. America gets the government it deserves.

I'm not sure about the gridlock. If we actually held these guys accountable, they might try and do a good job.

If I make a mistake at work, my first thought is how to fix it. When a politician makes a mistake at work, their first thought is how to blame the other guy. What's worse, "how to blame the other guy" is part of the DC decision making process from the get go.

We do get the government we deserve, and right now we are being governed by second graders. I wonder if Boehner's dad can beat up Obama's dad.

[OL FU]

U.S. Two-Year Yield Hits Record Low as Slow Growth, Europe May Spur Fed

http://www.bloomberg.com/news/2011-08-0 ... r-fed.html" onclick="window.open(this.href);return false;

this of course happened two days before the downgrade, but the downgrade had been warned a long time before.

The question is where are are th t-bill holders going to put there money?

[Ivytalk]

U.S. Two-Year Yield Hits Record Low as Slow Growth, Europe May Spur Fed

http://www.bloomberg.com/news/2011-08-0 ... r-fed.html" onclick="window.open(this.href);return false;

this of course happened two days before the downgrade, but the downgrade had been warned a long time before.

The question is where are are th t-bill holders going to put there money?

Under their pillowcases, just like mainejeff!

On the bright side, interest rates on savings accounts might go up from .1% to .2%.

[OL FU]

Speaking of being govern by second graders, alot of the politicians and pundits I hear are blaming tea party No Matter what you think of the tea party or what you think of their role in the debt ceiling debate, the tea party wasn't in existence or anywhere close to power when we started this downward spiral. If it wasn't for the establishment crowd running DC and running the debt through the roof, there wouldn't be a tea party.

[OL FU]

U.S. Two-Year Yield Hits Record Low as Slow Growth, Europe May Spur Fed

http://www.bloomberg.com/news/2011-08-0 ... r-fed.html" onclick="window.open(this.href);return false;

this of course happened two days before the downgrade, but the downgrade had been warned a long time before.

The question is where are are th t-bill holders going to put there money?

Under their pillowcases, just like mainejeff!

On the bright side, interest rates on savings accounts might go up from .1% to .2%.

Me and the Mainer finally have something in common

[travelinman67]

Ditto on everything OL FU said.

The true hits will be driven more by our debt problems than S&P.

Like OL FU pointed out, there are tons of institutional investors whose policies/bylaws exclude investment in sub AAA securities. Expect a slew of board/committee meetings over the next month either to amend policies, or vote to disinvest. Sad, but true.

S&P just drove a nail in their own coffin.

[danefan]

Ditto on everything OL FU said.

The true hits will be driven more by our debt problems than S&P.

Like OL FU pointed out, there are tons of institutional investors whose policies/bylaws exclude investment in sub AAA securities. Expect a slew of board/committee meetings over the next month either to amend policies, or vote to disinvest. Sad, but true.

S&P just drove a nail in their own coffin.

Yeah but ratings guidelines very rarely restrict investment based on one agency. Now if one of Moody's or AM Best downgrades too then I'd see a major issue for the investors. My point is I'm not all that concerned with one agency. If the others feel obliged to follow then we have some more serious issues on the horizon.

[travelinman67]

Ditto on everything OL FU said.

The true hits will be driven more by our debt problems than S&P.

Like OL FU pointed out, there are tons of institutional investors whose policies/bylaws exclude investment in sub AAA securities. Expect a slew of board/committee meetings over the next month either to amend policies, or vote to disinvest. Sad, but true.

S&P just drove a nail in their own coffin.

Yeah but ratings guidelines very rarely restrict investment based on one agency. Now if one of Moody's or AM Best downgrades too then I'd see a major issue for the investors. My point is I'm not all that concerned with one agency. If the others feel obliged to follow then we have some more serious issues on the horizon.

Personally, I agree. S&P has clearly demonstrated poor decisionmaking over the past decade. Don't know if it's incompetence or politically driven...I don't play the market. My principle concern is liquidity. The longer this capital conservation continues...the longer it will take for a recovery. And the only way I see the conservation logjam being broken up, is through substantive deregulation, repatriation of earnings through tax forgiveness/cuts in the top-tier rates, and massive reductions in govt. spending...none of which the Dems want, and even the Reps have demonstrated a reticence to seriously cut spending to a degree it curtails their patronage "needs".

Vote them all out.

Seriously.

[OL FU]

Ditto on everything OL FU said.

The true hits will be driven more by our debt problems than S&P.

Like OL FU pointed out, there are tons of institutional investors whose policies/bylaws exclude investment in sub AAA securities. Expect a slew of board/committee meetings over the next month either to amend policies, or vote to disinvest. Sad, but true.

S&P just drove a nail in their own coffin.

Yeah but ratings guidelines very rarely restrict investment based on one agency. Now if one of Moody's or AM Best downgrades too then I'd see a major issue for the investors. My point is I'm not all that concerned with one agency. If the others feel obliged to follow then we have some more serious issues on the horizon.

I think that has been my point but you said it better than me. I wonder how long it will be before S&P is infront of congress

Right now, even with all of our problems, there is no better alternative for conservative bond holders.

Now the other question is if the FED starts QE 3, what percentage of new debt will be acquired by the FED

[JohnStOnge]

Speaking of being govern by second graders, alot of the politicians and pundits I hear are blaming tea party No Matter what you think of the tea party or what you think of their role in the debt ceiling debate, the tea party wasn't in existence or anywhere close to power when we started this downward spiral. If it wasn't for the establishment crowd running DC and running the debt through the roof, there wouldn't be a tea party.

I heard a report that S&P said a key factor in doing what it did is the "gridlock" in Washington. If the report was accurate that could be parlayed into an argument that the Tea Party is to blame.

But as soon as I heard the report I thought, "You know, that's really bad." And the reason is that it suggests that "gridlock" in itself is worse than anything else. So I guess that if we had just routinely once again raised the debt ceiling in as a routine matter without much fanfare of discussion that would've been OK. To me, if the report on what S&P said is true, the idea is that we should want more of the same "go along and get along" crap that got us to this point to start with.

[danefan]

Speaking of being govern by second graders, alot of the politicians and pundits I hear are blaming tea party No Matter what you think of the tea party or what you think of their role in the debt ceiling debate, the tea party wasn't in existence or anywhere close to power when we started this downward spiral. If it wasn't for the establishment crowd running DC and running the debt through the roof, there wouldn't be a tea party.

I heard a report that S&P said a key factor in doing what it did is the "gridlock" in Washington. If the report was accurate that could be parlayed into an argument that the Tea Party is to blame.

But as soon as I heard the report I thought, "You know, that's really bad." And the reason is that it suggests that "gridlock" in itself is worse than anything else. So I guess that if we had just routinely once again raised the debt ceiling in as a routine matter without much fanfare of discussion that would've been OK. To me, if the report on what S&P said is true, the idea is that we should want more of the same "go along and get along" crap that got us to this point to start with.

I disagree JSO. The S&P downgrade is sketchy at best, but I do agree with the gridlock point. The debt ceiling is nothing other than the mechanism for Treasury to pay the debts already incurred by Congress. So gridlock on raising the debt ceiling is in actuality akin to a board of directors deciding if they still want to honor the debts they already incurred.

The decision to honor the debt already in place should have never been held hostage by the decision to incur new debt or not. That is exactly why borrowers confidence in the US as a debtor was called into question. And that's exactly why no other Congress has ever balked at raising the debt ceiling.

[dbackjon]

I heard a report that S&P said a key factor in doing what it did is the "gridlock" in Washington. If the report was accurate that could be parlayed into an argument that the Tea Party is to blame.

But as soon as I heard the report I thought, "You know, that's really bad." And the reason is that it suggests that "gridlock" in itself is worse than anything else. So I guess that if we had just routinely once again raised the debt ceiling in as a routine matter without much fanfare of discussion that would've been OK. To me, if the report on what S&P said is true, the idea is that we should want more of the same "go along and get along" crap that got us to this point to start with.

I disagree JSO. The S&P downgrade is sketchy at best, but I do agree with the gridlock point. The debt ceiling is nothing other than the mechanism for Treasury to pay the debts already incurred by Congress. So gridlock on raising the debt ceiling is in actuality akin to a board of directors deciding if they still want to honor the debts they already incurred.

The decision to honor the debt already in place should have never been held hostage by the decision to incur new debt or not. That is exactly why borrowers confidence in the US as a debtor was called into question. And that's exactly why no other Congress has ever balked at raising the debt ceiling.

Great post. If you want to lower the debt/cut spending/raise revenue

[OL FU]

I heard a report that S&P said a key factor in doing what it did is the "gridlock" in Washington. If the report was accurate that could be parlayed into an argument that the Tea Party is to blame.

But as soon as I heard the report I thought, "You know, that's really bad." And the reason is that it suggests that "gridlock" in itself is worse than anything else. So I guess that if we had just routinely once again raised the debt ceiling in as a routine matter without much fanfare of discussion that would've been OK. To me, if the report on what S&P said is true, the idea is that we should want more of the same "go along and get along" crap that got us to this point to start with.

I disagree JSO. The S&P downgrade is sketchy at best, but I do agree with the gridlock point. The debt ceiling is nothing other than the mechanism for Treasury to pay the debts already incurred by Congress. So gridlock on raising the debt ceiling is in actuality akin to a board of directors deciding if they still want to honor the debts they already incurred.

The decision to honor the debt already in place should have never been held hostage by the decision to incur new debt or not. That is exactly why borrowers confidence in the US as a debtor was called into question. And that's exactly why no other Congress has ever balked at raising the debt ceiling.

I disagree The US government is not a business. A business should operate as a cohesive unit. A Republican form of government is, by design, messy. One the other hand my confidence level in Congress getting a deal done went from 99% to 90%. A last minute deal was expected and just what we got. How in the hell can S&P not understand that. This is further evidence of what Joe said they they are trying to direct and manipulate government policy. They are incompetent and stupid for blaming the process and not judging the results (course the results which were minimal under any scenario considered might constitute a downgrade, but not the process. The statement that the process did should convince anyone that S&P should be disregarded.)

Additionally, one of the reasons that a congress has never balked raising the debt ceiling limit is that this is the first time with the exception of WWII where our deficits hit 100% of GDP and are growing exponentially faster than GDP. approximatley three times faster.

A slightly different subject. and btw it was my opinion that the tea party folks should have given a little more in this debate). I became sick and tired of hearing pundits and politicians say the tea partiers need to quit campaigning and start governing. In other words, what they were really saying is be like me. Make campaign promises and then when elected, forget them. I am more embarassed by establishment candidates of both parties who got us into this mess everyday.

[OL FU]

Speaking of being govern by second graders, alot of the politicians and pundits I hear are blaming tea party No Matter what you think of the tea party or what you think of their role in the debt ceiling debate, the tea party wasn't in existence or anywhere close to power when we started this downward spiral. If it wasn't for the establishment crowd running DC and running the debt through the roof, there wouldn't be a tea party.

I heard a report that S&P said a key factor in doing what it did is the "gridlock" in Washington. If the report was accurate that could be parlayed into an argument that the Tea Party is to blame.

But as soon as I heard the report I thought, "You know, that's really bad." And the reason is that it suggests that "gridlock" in itself is worse than anything else. So I guess that if we had just routinely once again raised the debt ceiling in as a routine matter without much fanfare of discussion that would've been OK. To me, if the report on what S&P said is true, the idea is that we should want more of the same "go along and get along" crap that got us to this point to start with.

S&P does in many ways what our politicians do constantly, they are concerned with the process instead of the results. Example, welfare of various sorts. We have to continue to help the poor and needy. We simply have to. It is the right thing to do. (and you know helping the poor is the right thing if done the right way). Forget the fact that we have created a multi-generational group of people dependant upon the government for subsistence. The same can be said for the republican arguments on Iraq and Afganistan. We can't stop now and let the soldiers who served die in vain. Two arguments that focus on the process and not the results. The same damn thing that S&P did.

[native]

Maybe congress will learn a lesson if we give them all a two year time-out.

I don't think I will vote for a single incumbent. The only way things will change is if we stop enabling these a-holes and vote them out. All of them, not just the ones from the "other" party.

They are all to blame. Anyone who tries to place the blame squarely on Obama or squarely on the GOP is not being honest about things. They all suck.

What would you have had the republicans do differently, BH?

[AZGrizFan]

S&P? We talkin' 'bout the same S&P that gave AAA ratings to shitty securities that helped create this whole mess?

And then claimed zero responsibility.


Yup

A bit of a credibility problem, perhaps?

[CID1990]

So anyways, what does it actually mean if S&P has us at AA+ if the others still have us at AAA?

I guess we will find out on Sunday night when the Asian markets open. Still, this will cost our government something extra to service our debt.

They opened down, and I just moved all of my TSP holdings into the G fund.

[OL FU]

I listened to S&P reps over the weekend an from an economic standpoint I don't necessarily disagree with their argument due to rapidly increasing future deficits. Not sure if they should have downgraded or not, but the economic arguments make sense. What still doesn't make sense is blaming it on the process. Sorry I think that is the wrong tact and let's people have misguided arguments. The problems is over the Bush years we started a trajectory of debt which would have eventually lead to troubles. Under Obama, that trajectory tripled with no plan to decrease it and here we are.

Question, if the Tea party had not come into existence what would have happened. The republicans would not have taken over the house. Earlier this year. Obama ask for a debt ceiling increase without strings. He would have gotten it if the republicans had not have controlled the house. he may have gotten it if the republicans controlled without the tea party influence. What would have been S&Ps reaction then? From what they said over the weekend, it should have been a bigger downgrade and the process would have had zero to do with it.

[OL FU]

I guess we will find out on Sunday night when the Asian markets open. Still, this will cost our government something extra to service our debt.

They opened down, and I just moved all of my TSP holdings into the G fund.

How far did the Markets fall. I heard Japan was 2% which means we won't know the impact until later after the markets have accepted the downgrade. Don't blame you for pulling your money. I also have no idea of whether they will go up or down, but the impact will be more clear at the end of the week.

Hopefully it won't get much worse.

[JoltinJoe]

They opened down, and I just moved all of my TSP holdings into the G fund.

How far did the Markets fall. I heard Japan was 2% which means we won't know the impact until later after the markets have accepted the downgrade. Don't blame you for pulling your money. I also have no idea of whether they will go up or down, but the impact will be more clear at the end of the week.

Hopefully it won't get much worse.

And where are the investors fleeing for safety from this uncertainty and turmoil? Us Treasuries! What an indictment of S&P. S&P counsels, but the market speaks, and it is clear that the investors are not buying that US Treasuries are no longer the safest investment in the world.

http://www.marketwatch.com/story/treasu ... atest_news" onclick="window.open(this.href);return false;

[danefan]

Futures are down 2.4-2.8% right now.

Unless you are close to retirement, i'd say stick to whatever investment plan you have. If we learned anything from 2008 it is that no matter how crazy the market is, if you stay disciplined and don't trade on fear or greed, you will make money. I know I wish I would have stuck to my dollar cost averaging strategy in 2008.