# S&P downgrades US Debt
**URL:** https://boards.straightdope.com/t/s-p-downgrades-us-debt/578838
**Category:** Great Debates
**Created:** [April 18, 2011, 3:10pm UTC](https://boards.straightdope.com/t/s-p-downgrades-us-debt/578838 "2011-04-18T15:10:31Z")
**Posts on this page:** 20
**Page:** 6
### Author:  [@gonzomax](https://boards.straightdope.com/u/gonzomax)
#### Post date: [April 20, 2011, 7:02pm UTC](https://boards.straightdope.com/t/s-p-downgrades-us-debt/578838/101 "2011-04-20T19:02:16Z")
> [@Jas09](#):
>
> Possibly. Even more likely once the first SS check doesn’t get cut the debt ceiling is raised the same day.
>
> There is a question, however, as to what is legally required. Since nobody has ever had the courage(?) to refuse to raise the debt ceiling I’m not sure there is a factual answer about which payment has precedence - the contractual debt repayment or the legislatively mandated SS payment.
Can’t happen. If they are unable to make full payment they have to cut it. In 30 years if we do nothing, they will pay 80 percent. They can not hit the treasury.
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### Author:  [@Saint\_Cad](https://boards.straightdope.com/u/Saint_Cad)
#### Post date: [April 20, 2011, 7:08pm UTC](https://boards.straightdope.com/t/s-p-downgrades-us-debt/578838/102 "2011-04-20T19:08:53Z")
> [@Sam\_Stone](#):
>
> No one cares about your past ability to pay. They care about the situation NOW and what it says about your ability to repay in the future.
Fair Issac and the mortgage companies would beg to differ with you.
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### Author:  [@wmfellows](https://boards.straightdope.com/u/wmfellows)
#### Post date: [April 20, 2011, 7:19pm UTC](https://boards.straightdope.com/t/s-p-downgrades-us-debt/578838/103 "2011-04-20T19:19:51Z")
> [@Sam\_Stone](#):
>
> How do you figure that? I never said anything about big gov’t vs small government. I limited my comments strictly to the fiscal problem facing the U.S. I didn’t even draw a distinction between tax cuts and spending hikes, other than to describe the reality of who is proposing what, and how little effect it will have on the overall problem.
I was reacting, perhaps too much, to this
> [@Sam\_Stone](#):
>
> … There’s the first place to start - repeal Obama’s health care plan before it has a chance to kick in and permanently change health care markets. Leave some of the taxes and spending cuts in place that were supposed to go towards funding it, and apply it to the deficit instead. That’s the most painless fix, since no one yet is relying on that money. …
I found this perhaps a bit of axe-grinding ish (given your deep idelogical hostility to the intiative), but on the other hand I must confess that I did not give the reaction full thought.
> [@RTFirefly](#):
>
> That’s nice of you, but I got tired of your antics, and have moved on. Nice knowing you. 🙂
Oh yes, my “antics.” Doubtless more fun to play argument clinic and construct analyses of Japan w/o bothering to read anything.
> [@Saint\_Cad](#):
>
> Fair Issac and the mortgage companies would beg to differ with you.
yes, agreed. Past history goes a long-way to suggesting Willingness is there. Ability is great, but if there is not Willingness, not meaningful. My firm has been stiffed by firms that had plenty of Ability, but no Willingness (and low morals to boot of course, but emerging markets, Africa… part of the cost of doing business).
On the national level, one reason Spain is squeaking by, like Ireland, but Greece is in deep doodoo is the Willingness factor. Spain and Ireland are seen as far more serious in Willingness.
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### Author:  [@Le\_Jacquelope](https://boards.straightdope.com/u/Le_Jacquelope)
#### Post date: [April 20, 2011, 7:38pm UTC](https://boards.straightdope.com/t/s-p-downgrades-us-debt/578838/104 "2011-04-20T19:38:12Z")
> [@Koxinga](#):
>
> I don’t think you remember Zimbabwe so well if you don’t recall what _happened_ to a great many people who did own a surviving farm. I somehow doubt [these](http://www.google.com/search?q=zimbabwe+farmers&hl=en&prmd=ivnsl&tbm=isch&tbo=u&source=univ&sa=X&ei=YrOuTdWyDIPCvQOx8YyGDw&ved=0CCwQsAQ) folks would describe themselves as “kings.”
Uhm, that doesn’t address what I was talking about. What I said was, if you have a surviving productive farm over there _right now_, you’ve got what people want, which is more important than any currency.
Now, about your link. Obviously you wanted to make an off-topic statement so let’s go there, eh?
The first pictures in that group look like white farmers who were beaten or killed during Mugabe’s poorly-managed land redistribution program. These were descendants of the European invaders who raped and murdered Zimbabweans, took over the country and ruled over the native black population and treated them like dogs.
If so then, forum ban or no ban, I cannot be arsed to give a flying rat’s ass about what happened to these people as they got kicked out of Zimbabwe. White invaders in Zimbabwe constituted 1% of the population and owned over half of their prime farmland. I’m sure you remember the guy who said “I do not believe in black majority rule—not in a thousand years.”
“..the native is to be treated as a child and denied the franchise. We must adopt a system of despotism in our relations with the barbarians of Southern Africa.” Remember that? Those pictures you posted were karma.
Now Mugabe was a real d-bag who screwed his people over epically by handing farms over to his incompetent buddies. The forced removal of those invaders could have been managed far better, by giving control to the experienced black Africans who worked on those farms. Mugabe deserves punishments that should be illegal to enumerate on any forum. But those pictures you showed me, especially the first ones? Zero sympathy. So sue me and call me names in The Pit for all I care. It won’t get those white farmers back in power in Zimbabwe; sadly it also won’t bring karma down on Mugabe for his screw-ups.
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### Author:  [@Dick\_Dastardly](https://boards.straightdope.com/u/Dick_Dastardly)
#### Post date: [April 26, 2011, 5:54pm UTC](https://boards.straightdope.com/t/s-p-downgrades-us-debt/578838/105 "2011-04-26T17:54:45Z")
> [@wmfellows](#):
>
> Err, no, it simply means that a downgrade watch is only one data point in the buying decision. One can 100% agree with S&P AND believe that the warning may have actually decreased the likelihood of a debt problem by raising the seriousness of the issue. Also, of course a warning for downgrade watch isn’t a trigger for portfolio action like an actual downgrade is. Reading market reaction over a couple days after a warning really doesn’t say anything at all. Evolution over the longer term will.
Yeah fair enough, I’m just trying to make a point. Here’s a better attempt. Since the meltdown and US bond yields falling to incredibly low levels, they’ve only shown increases over three stretches of time, and those strtches of time were when we had good economic news and sentiment that the economy would start improving, but then fell again due to reality intruding. And government debt is only in the situation it’s in due to the fact that the government has assumed so much private sector debt due to the failure of the private sector.
Finally:
> **[S&P: You're Welcome! - The Big Picture](https://ritholtz.com/2011/04/sp-your-welcome/)**
>
> Jim Morin on the S&P downgrade: \> Source: Miami Herald
🙂
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### Author:  [@Ludovic](https://boards.straightdope.com/u/Ludovic)
#### Post date: [April 26, 2011, 6:03pm UTC](https://boards.straightdope.com/t/s-p-downgrades-us-debt/578838/106 "2011-04-26T18:03:32Z")
> [@Le\_Jacquelope](#):
>
> If so then, forum ban or no ban, I cannot be arsed to give a flying rat’s ass about what happened to these people as they got kicked out of Zimbabwe.
Ahhh, collective blood guilt.
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### Author:  [@Le\_Jacquelope](https://boards.straightdope.com/u/Le_Jacquelope)
#### Post date: [April 26, 2011, 7:49pm UTC](https://boards.straightdope.com/t/s-p-downgrades-us-debt/578838/107 "2011-04-26T19:49:36Z")
> [@Ludovic](#):
>
> Ahhh, collective blood guilt.
All the black Zimbabweans suffered under collective blood guilt: they were guilty of being black.
That, and the people who got kicked out of Zimbabwe directly benefitted from ongoing racism against the native populace.
It’s like this - if I steal your car and keep it hidden for 20 years and my family makes a billion dollars using it as a vehicle for deliveries or whatever, your argument is we don’t owe you jack monkey squat. It’s been ours for 20 years so it’s ours for good. Conquerors keepers, losers weepers, all that stuff.
So when you get kicked out of the country - guess what? Conquerors keepers.
What goes around, comes around.
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### Author:  [@Koxinga](https://boards.straightdope.com/u/Koxinga)
#### Post date: [April 26, 2011, 10:46pm UTC](https://boards.straightdope.com/t/s-p-downgrades-us-debt/578838/108 "2011-04-26T22:46:40Z")
And how’s that working out for them?
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### Author:  [@Ludovic](https://boards.straightdope.com/u/Ludovic)
#### Post date: [April 27, 2011, 1:55am UTC](https://boards.straightdope.com/t/s-p-downgrades-us-debt/578838/109 "2011-04-27T01:55:33Z")
> [@Koxinga](#):
>
> And how’s that working out for them?
I was going to use those exact same words.
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### Author:  [@emacknight](https://boards.straightdope.com/u/emacknight)
#### Post date: [April 27, 2011, 4:10am UTC](https://boards.straightdope.com/t/s-p-downgrades-us-debt/578838/110 "2011-04-27T04:10:46Z")
Not is seems they’ve downgraded Japan as well. Maybe if everyone gets downgraded they’ll simply adjust the curve, you know, like with the bell curve in university. AA- will be the new AAA.
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### Author:  [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)
#### Post date: [April 27, 2011, 4:40am UTC](https://boards.straightdope.com/t/s-p-downgrades-us-debt/578838/111 "2011-04-27T04:40:31Z")
That’s not the way it works. A lower rating means increased risk. That means people will want more return on their investment. If every government got rated AA, that would just mean that they’d have to offer more interest to attract investors away from non-government investments.
How that would play out, I don’t know. A collapse in overall investment? A world interest rate increase, leading to another recession? Nothing good, certainly.
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### Author:  [@Koxinga](https://boards.straightdope.com/u/Koxinga)
#### Post date: [April 27, 2011, 5:34am UTC](https://boards.straightdope.com/t/s-p-downgrades-us-debt/578838/112 "2011-04-27T05:34:58Z")
> [@Sam\_Stone](#):
>
> That’s not the way it works. A lower rating means increased risk. That means people will want more return on their investment. If every government got rated AA, that would just mean that they’d have to offer more interest to attract investors away from non-government investments.
Or people simply become afraid to invest anywhere, once they have the feeling that no place is safe. Makes me think of [this article](http://blogs.reuters.com/jim-saft/2011/04/21/triumph-of-gold-the-anti-investment/):
> [@](#):
>
> “Triumph of gold, the anti-investment”
>
> . . . Rather than being an anti-currency, gold is really an anti-investment, not because it can’t pay off, but because it is the one asset that not only protects you against the bad actions of others but actually rewards you for them.
>
> If central bankers and politicians bring on massive inflation, gold goes up. If the U.S. threatens to slouch or leap towards default, gold goes up.
>
> The opposite of buying gold perhaps is to buy equities, because you are betting on creating products, jobs and wealth rather than just protecting yourself. On the other hand, a bar of gold has no executives that can loot the company or accountants that can aid in fraud. Really the world in which an investment in gold makes you rich is not a very appealing place.
The article opens by noting that the University of Texas Permanent University Fund (2nd largest such fund in the nation) recently insisted on taking _physical delivery_ of a _billion dollars’ worth_ of gold. That’s a billion dollars not going into the economy, folks.
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### Author:  [@China\_Guy](https://boards.straightdope.com/u/China_Guy)
#### Post date: [April 27, 2011, 2:03pm UTC](https://boards.straightdope.com/t/s-p-downgrades-us-debt/578838/113 "2011-04-27T14:03:04Z")
> [@Sam\_Stone](#):
>
> That’s not the way it works. A lower rating means increased risk. That means people will want more return on their investment. If every government got rated AA, that would just mean that they’d have to offer more interest to attract investors away from non-government investments.
S&P and the other rating agencies don’t set risk or the required ROI. The market does that. The rating agencies are usually a lagging indicator, and \*some \*funds are slaves to the ratings. Eg, can only hold bonds rated A and higher, so if the rating drops to BBB, then the fund is forced to sell by the funds internal by laws.
And Sam, remember that no company can have a rating that exceeds the sovereign (country) rating. So, there is direct correlation that a government would have to offer more interest to attract investors away from non government investments.
Frankly, I’d like you to show some significant examples of where plain vanilla corporate debt pays less interest than treasuries.
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### Author:  [@Le\_Jacquelope](https://boards.straightdope.com/u/Le_Jacquelope)
#### Post date: [April 27, 2011, 3:11pm UTC](https://boards.straightdope.com/t/s-p-downgrades-us-debt/578838/114 "2011-04-27T15:11:32Z")
> [@Koxinga](#):
>
> And how’s that working out for them?
Did you not read what I said above about Mugabe being a douchebag? The cause was just, but the guy totally blew it where execution was concerned.
Or is your argument that white people should retain the land and people they conquered, or else bad things inherently happen?
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### Author:  [@China\_Guy](https://boards.straightdope.com/u/China_Guy)
#### Post date: [April 27, 2011, 10:23pm UTC](https://boards.straightdope.com/t/s-p-downgrades-us-debt/578838/115 "2011-04-27T22:23:27Z")
Gah, typo that got it backwards. It should read:
remember that no company can have a rating that exceeds the sovereign (country) rating. So, there is direct correlation that a \*non-government \*would have to offer \*more \*interest to attract investors away from government investments.
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### Author:  [@Koxinga](https://boards.straightdope.com/u/Koxinga)
#### Post date: [April 28, 2011, 12:10am UTC](https://boards.straightdope.com/t/s-p-downgrades-us-debt/578838/116 "2011-04-28T00:10:20Z")
> [@Le\_Jacquelope](#):
>
> Did you not read what I said above about Mugabe being a douchebag? The cause was just, but the guy totally blew it where execution was concerned.
>
> Or is your argument that white people should retain the land and people they conquered, or else bad things inherently happen?
Dude, you were the one nattering on about Zimbabwe. Since you appear to be too thick to grasp my original point, speaking plainly it’s this: when society breaks down, rule of law goes out the window and aggrieved groups start looting in the name of “righting historical wrongs,” you’ll have only a day or two to jack yourself off on your now so valuable farm – until someone else with more guns comes and takes it from you, grabbing the only valuable thing left in society under the cover of whatever rationale they feel like coming up with. Resist, and you’ll end up like one of the people in the pictures. In the words of Mao, “Revolution ain’t a dinner party, asshole.” And “you wanna talk origins of political power? _Say hello to my leetle frien’!_”
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### Author:  [@Le\_Jacquelope](https://boards.straightdope.com/u/Le_Jacquelope)
#### Post date: [April 28, 2011, 3:29am UTC](https://boards.straightdope.com/t/s-p-downgrades-us-debt/578838/117 "2011-04-28T03:29:16Z")
> [@Koxinga](#):
>
> Dude, you were the one nattering on about Zimbabwe. Since you appear to be too thick to grasp my original point
You had no point. What you had was a frantic call to the whaaaaambulance for those poor put upon white invaders who subjugated the hell out of the natives of Zimbabwe.
> [@](#):
>
> speaking plainly it’s this: when society breaks down, rule of law goes out the window and aggrieved groups start looting in the name of “righting historical wrongs,” you’ll have only a day or two to jack yourself off on your now so valuable farm – until someone else with more guns comes and takes it from you,
Funny how this misguided reasoning was not applied to the white invaders when they seized African property for whatever reasons they did so.
Your “argument”, if you can call it that, is that when you take back what rightfully belongs to your people, you inherently must then have chaos and rule-by-the-gun. Your argument is that a rebellion must end in total chaos.
Your argument is flatly _insane._ The re-taking of African land from white invaders could have been carried out in a much more orderly way, with ownership transferred to the black farmers who worked for these former white masters and who knew how to maintain the farms.
“Revolution ain’t a dinner party, asshole.”? That was Charman Mao. That was not every rebellion. Not all rebellions end in lawlessness. If it did, the U.S. would probably not even be here now.
The rebellion in Zimbabwe was simply mismanaged. Horribly so.
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### Author:  [@emacknight](https://boards.straightdope.com/u/emacknight)
#### Post date: [April 28, 2011, 10:32pm UTC](https://boards.straightdope.com/t/s-p-downgrades-us-debt/578838/118 "2011-04-28T22:32:04Z")
> [@Le\_Jacquelope](#):
>
> You had no point. What you had was a frantic call to the whaaaaambulance for those poor put upon white invaders who subjugated the hell out of the natives of Zimbabwe.
> Funny how this misguided reasoning was not applied to the white invaders when they seized African property for whatever reasons they did so.
Many if not all of the white farmers in Zimbabwe bought and paid for the land. For more information on the subject consider watching _Mugabe and the White African_.
[http://www.mugabeandthewhiteafrican.com/](http://www.mugabeandthewhiteafrican.com/)
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### Author:  [@RTFirefly](https://boards.straightdope.com/u/RTFirefly)
#### Post date: [August 6, 2012, 4:48pm UTC](https://boards.straightdope.com/t/s-p-downgrades-us-debt/578838/119 "2012-08-06T16:48:01Z")
I just had to point out that S&P’s downgrade has forced long-term Treasury bond rates right through the roof, hasn’t it?
[Oh, wait.](http://finance.yahoo.com/echarts?s=%5ETYX+Interactive#symbol=%5Etyx;range=1y;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;) 😃
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### Author:  [@Kearsen](https://boards.straightdope.com/u/Kearsen)
#### Post date: [August 6, 2012, 5:21pm UTC](https://boards.straightdope.com/t/s-p-downgrades-us-debt/578838/120 "2012-08-06T17:21:08Z")
> [@Jas09](#):
>
> Or to increase revenues via the taxing powers of the government.
And thus we have the Republican/Democrat divide,
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