Friday, August 5, 2011


It is very interesting what happens when you start blaming people for financial meltdowns and saying that they were complicit in the near collapse of the financial system.  They start doing their job and actually making tough downgrades that no one wants them to.  Lawmakers and everyone else have yelled and screamed that the rating agencies didn't do their job but quietly they've been bribing them and nudging them to not do their job on the US sovereign debt for ages.

Well here it is.  I've been writing about this now for right about 2 years and the unthinkable has happened.  Is it the end of the world, probably not.  In the case of Japan and Canada both countries actually saw their yield on debt drop after downgrades, BUT you never know.  When you are the most secure and stable credit in the world and it suddenly isn't, who knows what will happen.  I will do another post this weekend with some guesses about what will be next.  Until then, here is the press release;

Here is the Standard and Poors 8 page Credit Report - GLOBAL CREDIT PORTAL
Here is an interview Tom Keene had with David Beers who is a Managing Director with Standard and Poors that was just completed.  Bloomberg cut off the interview in the last minute or so.  There isn't much meat here, but I wanted to make it available.

I read an article on a liberal website just before posting this that blamed the Tea Party for the downgrade!! Standard and Poors does reference in the release that they felt like the parties were so far apart that the atmosphere was not one that gave them confidence, but we must remember that the truth is that Standard and Poors told the CONgress on the front end before any legislatio­n was passed or the debt ceiling raised that they needed a total of $4 TRILLION in budget cuts to stave off a rating downgrade.  Did we get $4 Trillion?  NO!  We got something like $1 Trillion and I'm sure most of that is totally fake!

I provided my opinion several times over the last couple of weeks that the Republicans and Democrat politicians were completely tone deaf to the reality that the rating agencies were serious. These agencies are serious now that they are being blamed at least in part for the financial collapse of 2008 and 2009. Of course they are going to take action to drop the USA against the backdrop of a collapsing Eurozone. I think the US leadership didn't seriously consider the ramificati­ons of politics as usual and the impact on the USA when they disregarde­d the warnings. While the liberals may feel like the Tea Party was busy trying to win a battle these few CONgressme­n and women were the only ones listening to the debt rating agencies. They were essentiall­y fighting for exactly what S&P was telling them to get done  My only regret is that these Tea Party members caved in and didn't believe in their convictions.  If they would have hung tough we may not have avoided a downgrade, but we certainly would have had more cuts than we got.


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1 comment:

  1. the SP folks, want the bush tax cut to not get extended. obama one-tea party zero, plot thickens:)


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