S&P Downgrades US Credit Rating to AA-Plus

[MugenOne]

I think you’ve gotten that in reverse.

Actually, that’s false. When it comes to a company, the first people that get money if it goes bankrupt are the shareholders. The bondholders (debtholders) are actually last in line. Government tax comes before bonds.

For people and government though, they don’t have anything in the hierarchy above bonds (debt), so it does come first.

 

[exoflare]

Stop one on our journey to the barter system.

 

[AnotherVoice]

Contrarily I submit the past few weeks show we have too much leadership with non of our princes willing to abandon what doesn’t work for policies that do work. For the establishment republicans and democrats alike it proves all their silly plans are as empty as their suits. Besides we were never in position of defaulting in the near future. The change in bond rating only is a bet of future defaulting.

Funny thing about debt, once you owe somebody a lot of money you are their slave. They get first dibs on part of your life whether you like it or not.

You belief that we were never in a position of defaulting may or may not be correct but it is contrary to what or President was saying. He was probably using this as a scare tactic but that then further undermines his credibility.

 

[ProVobis]

This should be no surprise. The Congress did not reduce government spending.

Congress doesn’t control all the spending unfortunately. The Federal Reserve has managed to print and tack on about $1.6 trillion of debt without Congressional approval. This money is fake but sits on some banks’ ledgers doing nothing for the economy. The taxpayer, meanwhile, is on the hook for this $1.6 trillion and is stuck with making interest payments and full payment when the bonds come due. And now Bernanke is contemplating a QE3 (or some other form of Fed “spending.”) Until this is stopped or someone wakes up over there in Washington, the credit rating deserves to be downgraded.

 

[ProVobis]

The real question is when will investors start to care? So far, the default crisis has not impacted interest rates negatively at all.

Yes, this is interesting. But then the American dollar is still the default currency and Bernanke can print an infinite amount of money apparently to cover all expenditures, so why should the ratings matter? Bonds continued to rise in spite of some Chinese agency downgrading American debt all the way down to A, the equivalent of Russian bond rating.

 

[OrdinaryMelkite]

The immediate impact will probably be pretty negligible – possibly some damage to the stock market (hurting your 401k if you have one) and maybe heightened interest rates.

The real impact will in the medium- to longer-term. This will increase borrowing costs and thus the deficit, which could lead to further downgrades. The fact that Congress cannot repudiate the debt Constitutionally means this could very well become a Constitutional crisis eventually.

I agree. Short term it won’t be so bad, but middle and long-term, this is going to be catastrophic.

Very catastrophic.

Jesus, help our country.

Cover us with your Grace and your Mercy.

Through the prayers of the Mother Of God, have mercy on us and save us. Amen.

 

[ProVobis]

The real impact will in the medium- to longer-term. This will increase borrowing costs and thus the deficit, which could lead to further downgrades.

What’s interesting is that much of this debt was accrued at times when short-term interest rates were 1% or less. Perhaps higher rates will make the Congress think twice before starting wars or socializing corporate losses. Not only that but savers can start earning a little interest income. 3% is not asking too much. SS benefits are usually not enough.

 

[Stjudeprayforus]

I agree. Short term it won’t be so bad, but middle and long-term, this is going to be catastrophic.

Very catastrophic.

Jesus, help our country.

Cover us with your Grace and your Mercy.

Through the prayers of the Mother Of God, have mercy on us and save us. Amen.

Amen.

 

[MugenOne]

As for individual investors, the downgrade is already factored or priced in. The U.S. has some financial issues that the whole world already knew about before the downgrade…The downgrade was just addressed today by the S&P as being official even though it had already happened weeks ago…Investors were selling on the rumor…So it’s buy on the news.

 

[poker10]

Yeah, these credit agencies did such a good job (insert sarcasm here) at rating the big banks just before the crisis in 2008. We should believe everything they say…I think Congress should hold hearings on their role in the financial crisis from three years ago.

 

[OrdinaryMelkite]

Yeah, these credit agencies did such a good job (insert sarcasm here) at rating the big banks just before the crisis in 2008. We should believe everything they say…I think Congress should hold hearings on their role in the financial crisis from three years ago.

And Geithner should be forced to resign…as of “yesterday.”

 

[poker10]

That didn’t take long. Less than a week after “averting disaster” with a supposed default saving budget deal, we now have instead a whopper of an inflation ahead of us. Of course, that will be prime excuse for the Democrats to rally around higher taxes. (even though they will be going way up when the Bush tax cuts expire next year).
There is enough lag time that interest rates will only start climbing in 2012.

Financial talk show host Dave Ramsey put it well:
“If the US Government was a family, they would be making $58,000 a year, they spend $75,000 a year, & are $327,000 in credit card debt. They are currently proposing BIG spending cuts to reduce their spending to $72,000 a year. These are the actual proportions of the federal budget & debt, reduced to a level that we can understand.” - Dave Ramsey

How would you rate the creditworthiness of the household example shown above?

A family isn’t constitutionally required to defend the borders of their yard from foreign invaders.

 

[poker10]

And Geithner should be forced to resign…as of “yesterday.”

Of course, but the whomever replaces him won’t be any better. They’re all in the back pocket of Wall Street.

 

[ProVobis]

Of course, but the whomever replaces him won’t be any better. They’re all in the back pocket of Wall Street.

Probably. Jim Cramer mentioned today he’d want the post.

 

[estesbob]

Actually, that’s false. When it comes to a company, the first people that get money if it goes bankrupt are the shareholders. The bondholders (debtholders) are actually last in line. Government tax comes before bonds.

For people and government though, they don’t have anything in the hierarchy above bonds (debt), so it does come first.

You’ve got that backwards. Bonds and preferred stockholders come first, common stockholders last.

 

[OrdinaryMelkite]

Probably. Jim Cramer mentioned today he’d want the post.

I very much doubt that would happen. DO think it would be interesting, to say the least.

Just know this----possible Market crash on Monday. May God help us.

 

[SVP]

A family isn’t constitutionally required to defend the borders of their yard from foreign invaders.

That’s why this debt deal/budget debacle/rating downgrade is such a major issue. The first thing on the chopping block for a Democrat controlled congress is the military budget, thus essentially abdicating further their constitutional duties, especially in a very turbulent world.

 

[zz912]

Actually, that’s false. When it comes to a company, the first people that get money if it goes bankrupt are the shareholders. The bondholders (debtholders) are actually last in line. Government tax comes before bonds.

For people and government though, they don’t have anything in the hierarchy above bonds (debt), so it does come first.

Nope, not correct at all.

Priority to bankruptcy is:

1. employee pay owed
2. bondholders/creditors/payables
3. owners

 

[Birdpreacher]

Asked who was to blame, Chambers said, “This is a problem that’s been a long time in the making—well over this administration, the prior administration.”

Congress should shoulder some of the blame, he said. “The first thing it could have done is to have raised the debt ceiling in a timely manner so that much of this debate had been avoided to begin with, as it had done 60 or 70 times since 1960 without that much debate.”

Chambers added that his agency’s decision is likely to have a long-term impact. “Once you lose your AAA, it doesn’t usually bounce back,” he said.

He pointed to the decision by Congress about whether to extend the 2001 and 2003 tax cuts as one crucial area. “If you let them lapse for the high-income earners, that could give you another $950 billion,” he said.

cnn.com/2011/BUSINESS/08/05/global.economy.cnn/

 

[sw85]

Yeah, these credit agencies did such a good job (insert sarcasm here) at rating the big banks just before the crisis in 2008. We should believe everything they say…I think Congress should hold hearings on their role in the financial crisis from three years ago.

All this means is that they’re always late to show – and once they make a determination, *everyone *knows it’s final.

As I said before, this should’ve been done years ago.