And here is a New York Times article from 1881:
I don’t have time to copy it, but in essence, President Hayes vetoed a bill to “re-fund” the national debt on the ground that the Senate had “engrafted” legislation into the bill which would limit competition among banks.
No, because (generally speaking) you have no legitimate right to take or threaten a hostage and in fact doing so is clearly immoral.
Are you saying that it’s similarly illegitimate to use the debt ceiling as a bargaining chip?
ETA: And please tell me what a “sustained threat” is.
Whether we think it’s legitimate or not is another discussion really. Standard and Poor’s said the main reason they downgraded the US’s credit rating is because of the political standoff over the debt ceiling. I said that standoff was manufactured entirely by the Republican party, and thus they bear the responsibility for the downgrade. You seem to be have agreed with this assessment; you’re saying instead that Republicans had a legitimate right to hold the debt ceiling hostage. Whether that’s true or not doesn’t have a bearing on the fact that their decision to hold the debt ceiling hostage is primarily what caused the credit downgrade.
If you feel that holding up debt ceiling legislation is analogous to holding a human being hostage, then you are implicitly saying it’s illegitimate.
What I am saying is that either side could have ended the standoff by capitulating. You seem to be saying that the situation is assymmetrical because it was legitimate for the Democrats to insist on a debt ceiling increase without any strings attached (assuming that that was their position), but it was not legitimate for the Republicans to attach conditions.
Well, can we assume for the sake of discussion that it was just as legitimate for the Republicans to insist on conditions as it was for the Democrats to insist on no conditions (assuming that’s what happened)?
And yet again I ask you:
What is a “sustained threat”? I really would like to know.
S & P was suggesting that the debt ceiling is now in political play. There is no guarantee that it will not be raised without comment in the future. Commentators around the world were talking about how stupid the debt ceiling debate was. But if the Repubs think it was a political gain, they will continue attacking it is the future.
It was also mentioned that no revenue was in the agreement. Dropping the stupid Bush tax cuts would have been an enormous help in cutting the deficits.
Would you want to have enough debt outstanding that countries like China could use your bonds as one of their primary fiscal reserves? Given your population and GDP it would represent a massive debt to pop or debt to GDP ratio.
I just heard that S&P made a $2 trillion error in their computation. Why anyone listens to them after they totally fucked up the economy in 2007 is beyond my comprehension.
To put a little sanity into the discussion, let me mention that the US total debt is getting to 100% of the GDP, which is very high, but not as high as in 1945, when it was roughly 120%. But the US income tax was quite high, the marginal rate hitting 91% during the Eisenhower administration. There was some inflation, of course, but nothing we couldn’t handle. And the debt as a percentage of the GDP fell steadily down, IIRC, to 40%. This was caused much more by the vast increase in the GDP than by the lowering of the debt, but the debt was lowered somewhat. During the Kennedy, Nixon, Ford, and Carter administrations, it fluctuated, but didn’t go up or down much. During the early part of the Reagan administration it went up, albeit slowly, but then went up sharply during the second term and Bush I. It went down quite a bit under Clinton, but started rising during Bush II’s first term and has gone up sharply since then (both under Bush and Obama) it has gone through the roof. But still not up to what it was in 1945. The difference was that both parties were willing to impose taxes to control the debt. The largest increase was in Eisenhower’s first term, with a GOP congress (both houses). Notably this was the era in which the middle class took off and the highest executives were still modestly paid. No point in giving the executive big bucks if 91% of the excess will be taxed away.
Didn’t S & P, within recent memory, also think that WorldCom and Enron were splendid investment opportunities? They need a new crystal ball.
The Republicans were just going along with this quote:
“The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. … Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘the buck stops here. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.”
Barack Hussein Obama
It’s pretty simple, Australia simply does not have the scale to be a “safe harbor” for the entire world. The Australian currency could not absorb billions of dollars traded. The Australian debt market is little league compared with pro anything - it does not have a bond market that can support global investment. No offense, but it’s a tiny podunk economy with no military and little global influence much less power. More importantly, even if it wanted to, Australia could not become the global fiat money nor investment safe haven. Ipso facto, it’s not really AAA.
Look at it this way. Especially with the Eurozone, there is no big global credit or currency market except for the US. The US can, and some might argue should, be usurped from being the de facto global currency. But there is simply no other place one can park trillions worth of dollars. Lord knows the oil kingdoms and China, Russia, et al have tried to diversify. Now this could shift but would take at least a decade and be predicated on a currency or basket of currencies being able to substitute for the greenback.
Again, what you have to understand, is there is no “global rule” but only accepted practice. AAA is predicated on absolute and relative valuations. Especially with regards to sovereign debt.
Credit analysts are a wierd breed anyway. All they care about is default within a specified timeframe. Eg, Enron debt for the next quarter might be AAA but for the next year might be B. Credit analysts look at things in terms of default liklihood and that’s it. They are not looking at the underlying economy or business health, except for where that supports the cash flow to service bonds over the period they are assessing.
Here’s the head of Pimco speaking on the same subject.
"The downgrade by S&P “may well raise questions about other members of the dwindling AAA club,” El-Erian, 52, the Newport Beach, California-based chief executive officer and co-chief investment officer at Pimco, the world’s largest manager of bond funds, wrote in an e-mail today. S&P gives 18 sovereign entities its top ranking, including Australia, Hong Kong and the Isle of Man, according to a July report. "
There’s a huge difference between a symbolic “no” vote on a bill that everyone knows is going to pass and threatening to send the economy down the crapper if you don’t get your way. If there weren’t, then people wouldn’t feel the need to jump in here and get this thread off topic defending the republicans actions.
Sure, it was symbolic. But what was it symbolic of?
Is this really true? I reported on the Board earlier that I held Telefonos de Argentina dollar bonds which were made whole when Argentina defaulted on its government debt.
And quibble about GE. Or did I miss a rating upgrade?
From msnbc.msn.com/id/29655042/ns/business-us_business/t/ge-loses-top-credit-rating :
I found an article that a) agrees with China Guy that S&P have a policy of not rating companies higher than the sovereign and b) says that in this case the policy will not apply.
The incorrect apostrophe notwithstanding, the article refers to 4 firms that are rated AAA: Microsoft, Exxon Mobil, Johnson and Johnson and Automatic Data Processing.
In fact, Japan is annoyed by the rise of its currency. And there isn’t much it can do about it, since the interest rate there is already zero, if I’m not mistaken.
Or they could start buying our land, buildings and businesses. I am not sure why they haven’t done this already. I have been meaning to ask just what china could buy if they wanted to.
The DOW just closed under 11,000 with what looks like a large volume sell off.
Time to get greedy, & buy.
Apparently the answer is investors are abandoning the stock market for the safety of US Treasuries. Wait, what!?