Moody’S Puts The Us On Review For Possible Downgrade

[Guest tbatst2000]

http://ftalphaville.ft.com/blog/2011/07/13/621721/moodys-puts-the-us-on-review-for-possible-downgrade/

I never thought any of the US owned ratings agencies would dare do that. How long before they're hauled before a Senate committee to explain the error of their ways?

[crash2006]

http://ftalphaville....ible-downgrade/

I never thought any of the US owned ratings agencies would dare do that. How long before they're hauled before a Senate committee to explain the error of their ways?

Well China Bought More Treasuries Than Disclosed they are speeding up the crash , they are going to turn the US into a dumping ground.

[kraft]

What are their bombs rated?

[Roman Roady]

Does Mr Market have to answer to anyone?

[sesim]

Does Mr Market have to answer to anyone?

Credit Agencies just hold up a mirror to the subject at hand, and then Mr Market takes a punt on how ugly you are taking that into account (or not sometimes, if the CA's are obviously biaised)

The EU twonks didn't like the reflection, so instead of improving the what is being reflected, they try to distort and break the mirror. Same will happen for the US.

Soon, when Mr Market continues betting on the inevitable, the EU/US twonks will have to shut down Mr Market's ability to bet on your ugliness, and Mr Market will be forced to allocate his capital where the twonks dictate.

Ban on short selling, fx controls, capital controls, theft of pensions/savings and forced purchase of (bankrupt) sovereign bonds - individual or new euro bonds.

I wouldn't underestimated these eu-idiot'/us/bankster cabal's ability to enact all sorts of draconian laws (since they, not the politicians make the laws) to force capital allocation/theft at this stage.

They would do this rather than just let countries default, banks go under, debut jubiliees etc, which would solve the problem much quicker.

No - expect the slow grind into the ground face-first until the people are on the streets everywhere.

Incidentally, I hope that the EU succeeds in their flag project, as it will give everyone a common enemy and focus, and something to burn symbolically. They're way too hidden away at the moment. Let's be clear who (partly) is responsible.

The EU are so weak - they have no army to enforce their madness, which means it might be over in Europe quicker than USA (too many of 'us', not many of 'them', whereas the US government and their people are heavilly armed all round.

Interesting times... got G.... spare underpants ?

Edited July 14, 2011 by sesim

[scottbeard]

After the PIIGS, the US look the most likely to default to be honest. They have a huge deficit, and hence rising debt, if they raise the limit, and default next month if they don't.

[OnlyMe]

So, if the US borrow some more money then their credit rating will be A OK.

Beyond farce really whne you think about it. What the hell is the difference in having a capital haircut or your investment being paid back in flotsam, there is none.

[VeryMeanReversion]

Another view is that the US is a military backed economy rather than asset backed. They only get downgraded when the bullets run out.

[Nationalist]

After the PIIGS, the US look the most likely to default to be honest. They have a huge deficit, and hence rising debt, if they raise the limit, and default next month if they don't.

There's nothing to stop Obama calling the Bureau of Engraving and ordering a batch of 20 $1 trillion notes. That would pay off the US national debt and leave plenty over for current spending.

[interestrateripoff]

Can we expect the US to respond like Europe has?

[Injin]

Another view is that the US is a military backed economy rather than asset backed. They only get downgraded when the bullets run out.

That was the case for Russia once.

Their soldiers had to walk hundreds of miles home when the chegues for bullets and tank fuel started to bounce.

[DoctorJ]

its ok. Henk Potts on Talk Sport said that they would just raise the debt ceiling and this problem "would go away".......

kinda makes you wonder whether they can just keep on raising it forever

As someone else has already posted, perhaps the only way to end this is to raise rates, but I don't see that happening any time soon.

[R K]

When Reagan left office US income tax revenue was c. 18% of GDP

For 2011 US income tax revenue will be c. 6% of GDP

The solution is a very simple one, which for some unfathomable reason the Toy Party nutjobs refuse to understand and that is that that they are giving far too much money away to the rich and need to raise taxes domestically and take firm action against Chinese mercantilism (the root cause of all our woes for the last decade).

Job done.

[Injin]

When Reagan left office US income tax revenue was c. 18% of GDP

For 2011 US income tax revenue will be c. 6% of GDP

The solution is a very simple one, which for some unfathomable reason the Toy Party nutjobs refuse to understand and that is that that they are giving far too much money away to the rich and need to raise taxes domestically and take firm action against Chinese mercantilism (the root cause of all our woes for the last decade).

Job done.

Can't happen, won't happen.

The rich can outbid you for control of the state.

[R K]

Can't happen, won't happen.

The rich can outbid you for control of the state.

I'm immune to your NLP Injin old son.

And your anarchism.

In any event you flip flop from 'a few rich people can't suppress the people' a la middle east to your statement above.

Filed with 'nutjobs'. Sorry matey.

Edited July 14, 2011 by Red Karma

[Chuffy Chuffnell]

I will be raising a cheeky glass when the UK has a better credit rating that the U S of A..

[JaneTracy]

I notice that some are questioning the logic behind this which is that everything will be okay if the US raises its debt ceiling and borrows some more.... It is put well here.

If we also consider the Moody’s move there is a rather curious logic structure behind it. I do not mean the obvious bit that a shut down would lead to be a downgrade. What I mean is the implication behind this note that everything will be okay and dandy if the debt ceiling is raised and the borrowing carousel carries on! This ignores the extraordinary scale of the borrowing that the US government fiscal plans imply and ignores the fact that as we have seen in the Euro zone such problems do not lead to gradual market responses but instead to a response based on the straw that broke the camels back where one day few are bothered and the next everyone is followed by a fast slippery slope of lower bond prices and higher yields.

If you want an example of current complacency I would return you to the ten-year bond yield of 2.9% I quoted above.

http://t.co/Taglad0.

[ccc]

I don't know how this is all going to end. However I have a feeling there will be an almight debt write off of some sort.

Things will get worse and worse and lots of countries will get together and just decide to write off a lot of debts thay owe to each other and who knows who else.

Whether or how that would work - I have no idea. Of course private companies would lose a lot of money - especially pensions etc.. - if countries just decided to cancel all their bonds etc..

However they may put in some compensation scheme in place where the bonds that have disappered are simply replaced with new magic money exactly equal to the old. The Governments Bonds are cancelled. Suddenly they have far less, or no, debt compared to before. The companies and pensions have the same Zeros on the computer screen as before. Nobody in the general public has any more of this money so hyperinflation may not be as serious a concern. Although who knows about that.

Would anyone really notice ? The downside is that people lose faith in the FIAT funny money game. Then again - they have been printing funny money for years now and people still head down to the shops to buy their shopping with the funny money and don't give it a second thought.

The only other option I can see is nearly every other country eventually defaults and collapses. Which would lead to a similar outcome but in a far messier way.

I would not be surprised if discussions like this are already underway.

[Injin]

I'm immune to your NLP Injin old son.

You can't be immune to unconscious processes.

And your anarchism.

The right answer is the right answer is the right answer...

In any event you flip flop from 'a few rich people can't suppress the people' a la middle east to your statement above.

Filed with 'nutjobs'. Sorry matey.

The exact thing is this -

A few rich people can't suppress the majority and have large amounts of prosperity.

I am guessing they'll be happy with being riches relative to the likes of me and you rather than give up their power. What do you think they'll do?

[switters]

You can't be immune to unconscious processes.

I don't know?! the immune system is unconscious after all.

[A.steve]

When Reagan left office US income tax revenue was c. 18% of GDP

For 2011 US income tax revenue will be c. 6% of GDP

That's an amazing statistic... not, of course, that I disbelieve you... but do you have a reference?

I'd also be interested to compare and contrast ratios over time for other developed economies - I think that would be a fascinating thing to research. A while ago, I considered official statistics - a popular belief was that the likes of CPI and RPI were rigged... I managed to convince myself that they are accurately reported, even if the general public doesn't typically understand what they represent. When it came to GDP, however, I utterly failed to re-assure myself that the figure had any coherent definition... so wasn't able to test published data myself with empiric tests.

If the ratio of tax revenue to reported GDP is falling - I'd probably argue that the most likely explanation is that GDP is being over reported if it is in any way a measure of productive activity in an economy... for, as the adage goes: "Nothing is certain but death and taxes."

Assuming your figures, a quick 'back of an envelope' calculation suggests that, if we accept 'death and taxes' as certain - then GDP has been over-stated... and if the over-statement has been constant over the past 25 years - it's been over-stated by ~4.4% - or, in other words - the US has been in a perpetual state of recession - in real terms.

Edited July 14, 2011 by A.steve

[fadeaway]

The markets shrug off a lot of things, but this will hit very hard.

[Deckard]

http://ftalphaville.ft.com/blog/2011/07/13/621721/moodys-puts-the-us-on-review-for-possible-downgrade/

I never thought any of the US owned ratings agencies would dare do that. How long before they're hauled before a Senate committee to explain the error of their ways?

Short memory?

S&P threatens to cut U.S. credit rating on deficit

Moodys had to follow suit at some stage - just to cover the tail risk of the U.S. failing to reach a last-minute deal on the debt ceiling.

Simple as that.

[kraft]

Another view is that the US is a military backed economy rather than asset backed. They only get downgraded when the bullets run out.

Yep contrary to what the gold/silver people say, the US dollar is indeed back by metal - lead and plutonium

And trust me you don't ever want to take "active delivery" of said assets.

[Tiger Woods?]

http://ftalphaville.ft.com/blog/2011/07/13/621721/moodys-puts-the-us-on-review-for-possible-downgrade/

I never thought any of the US owned ratings agencies would dare do that. How long before they're hauled before a Senate committee to explain the error of their ways?

They have no intention of doing it. Just a smokescreen so that they can be "seen to be fair" whilst shafting EU credit ratings for fun and profit whilst their hedge fund owners can make a killing from the volatility. (Yes, do have a look who the majority shareholders of these institutions are...)

Edited July 14, 2011 by Tiger Woods?