# S&P says 'I told you so' about US credit rating **URL:** \ **Category:** Great Debates\ **Created:** [October 1, 2013, 12:45am UTC](https://boards.straightdope.com/t/s-p-says-i-told-you-so-about-us-credit-rating/670060 "2013-10-01T00:45:13Z")\ **Posts on this page:** 20\ **Page:** 3
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [October 1, 2013, 5:08pm UTC](https://boards.straightdope.com/t/s-p-says-i-told-you-so-about-us-credit-rating/670060/41 "2013-10-01T17:08:44Z")
> [@deltasigma](#): > > I guess you don’t grasp the idea of something being positive for some and negative for others. Sure I do. But in that respect I don’t see how this is any different than the effect of any other action or inaction by government. Like the old saying, we live in interesting times; true, but not terribly enlightening. It doesn’t take much knowledge of the markets or finance to say cause and effect has not been repealed. The trick is in successfully predicting what effect will proceed from a given cause. If you aren’t willing to go out on a limb about the consequences of recent events, I don’t see what the point of the thread is. ---
**Author:** ![Jonathan\_Chance](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jonathan_chance/32/701_2.png) [@Jonathan\_Chance](https://boards.straightdope.com/u/Jonathan_Chance)\ **Post date:** [October 1, 2013, 5:09pm UTC](https://boards.straightdope.com/t/s-p-says-i-told-you-so-about-us-credit-rating/670060/42 "2013-10-01T17:09:23Z")
Wait, what? This entire thread is premised on you caring about what the S&P is saying. Your OP uses it to justify some sack dancing from an earlier thread. It either matters or it doesn’t. One way or another you’re just wrong. ---
**Author:** ![deltasigma](https://avatars.discourse-cdn.com/v4/letter/d/e5b9ba/32.png) [@deltasigma](https://boards.straightdope.com/u/deltasigma)\ **Post date:** [October 1, 2013, 5:16pm UTC](https://boards.straightdope.com/t/s-p-says-i-told-you-so-about-us-credit-rating/670060/43 "2013-10-01T17:16:58Z")
> [@Fear\_Itself](#): > > Sure I do. But in that respect I don’t see how this is any different than the effect of any other action or inaction by government. Like the old saying, we live in interesting times; true, but not terribly enlightening. It doesn’t take much knowledge of the markets or finance to say cause and effect has not been repealed. The trick is in successfully predicting what effect will proceed from a given cause. If you aren’t willing to go out on a limb about the consequences of recent events, I don’t see what the point of the thread is. The point is the same I tried to make in the pit thread - a dysfunctional govt has deleterious and possibly irreparable effects on the economy. No one ever seemed to understand the point over there and I don’t expect the result to be any different here. > [@Jonathan\_Chance](#): > > Wait, what? > > This entire thread is premised on you caring about what the S&P is saying. Your OP uses it to justify some sack dancing from an earlier thread. It either matters or it doesn’t. One way or another you’re just wrong. No, it was to highlight the point I was making in the pit thread I referenced which is what I’ve just stated above. ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [October 1, 2013, 5:23pm UTC](https://boards.straightdope.com/t/s-p-says-i-told-you-so-about-us-credit-rating/670060/44 "2013-10-01T17:23:40Z")
> [@deltasigma](#): > > The point is the same I tried to make in the pit thread - a dysfunctional govt has deleterious and possibly irreparable effects on the economy. Since you didn’t include a link to a pit thread, I have no idea what you are talking about. By the way, the link you posted in your OP is broken. ---
**Author:** ![deltasigma](https://avatars.discourse-cdn.com/v4/letter/d/e5b9ba/32.png) [@deltasigma](https://boards.straightdope.com/u/deltasigma)\ **Post date:** [October 1, 2013, 5:29pm UTC](https://boards.straightdope.com/t/s-p-says-i-told-you-so-about-us-credit-rating/670060/45 "2013-10-01T17:29:30Z")
vBullentin prefixed it with the SDMB qualifier I think, not sure why. Here it is - [S&P: Q&A on the Debt Ceiling Debate](http://www.businessinsider.com/sp-qa-on-the-debt-ceiling-debate-2013-9) The pit thread was a train wreck so I’m not going to inflict that on people ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [October 1, 2013, 5:37pm UTC](https://boards.straightdope.com/t/s-p-says-i-told-you-so-about-us-credit-rating/670060/46 "2013-10-01T17:37:35Z")
The S&P report cited in your link is titled, "“The Debt Ceiling Debate Is Unlikely To Change The ‘AA+’ U.S. Sovereign Rating,”. That is the position of S&P. So just what is your position? ---
**Author:** ![deltasigma](https://avatars.discourse-cdn.com/v4/letter/d/e5b9ba/32.png) [@deltasigma](https://boards.straightdope.com/u/deltasigma)\ **Post date:** [October 1, 2013, 5:40pm UTC](https://boards.straightdope.com/t/s-p-says-i-told-you-so-about-us-credit-rating/670060/47 "2013-10-01T17:40:23Z")
> [@Fear\_Itself](#): > > The S&P report cited in your link is titled, "“The Debt Ceiling Debate Is Unlikely To Change The ‘AA+’ U.S. Sovereign Rating,”. That is the position of S&P. So just what is your position? Quick quiz. If I think S&P is irrelevant, what would you imagine I think of sovereign ratings? ---
**Author:** ![Jonathan\_Chance](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jonathan_chance/32/701_2.png) [@Jonathan\_Chance](https://boards.straightdope.com/u/Jonathan_Chance)\ **Post date:** [October 1, 2013, 5:49pm UTC](https://boards.straightdope.com/t/s-p-says-i-told-you-so-about-us-credit-rating/670060/48 "2013-10-01T17:49:08Z")
Again, you’re at the point where you say ‘the S&P is irrelevant’ while then citing an article that quotes the S&P. You can’t have it both ways and continuing to do so seriously undermines the seriousness with which others can take your opinion. Toss in your dismissal of the ‘sovereign debt’ and you’re really becoming wrong all around. I’d advise some education before trying to participate in these threads. Sovereign debt and (honestly) debt ratings can have serious impact on bonds and capital motion. If for nothing else that certain bond holders are required to only invest in very high grade bonds. Should treasuries drop below that point - which I doubt but your quote in the OP mentions as an unlikely but possible scenario - suddenly the number of places that money can go will shrink enormously. ---
**Author:** ![Crotalus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/crotalus/32/41_2.png) [@Crotalus](https://boards.straightdope.com/u/Crotalus)\ **Post date:** [October 1, 2013, 5:49pm UTC](https://boards.straightdope.com/t/s-p-says-i-told-you-so-about-us-credit-rating/670060/49 "2013-10-01T17:49:34Z")
> [@deltasigma](#): > > Quick quiz. If I think S&P is irrelevant, what would you imagine I think of sovereign ratings? Could you possible jolt yourself into a moment of coherence and tell us what , if anything, that you think about whatever the hell your subject is? ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [October 1, 2013, 5:51pm UTC](https://boards.straightdope.com/t/s-p-says-i-told-you-so-about-us-credit-rating/670060/50 "2013-10-01T17:51:30Z")
> [@deltasigma](#): > > Quick quiz. If I think S&P is irrelevant, what would you imagine I think of sovereign ratings? I asked you first. ---
**Author:** ![deltasigma](https://avatars.discourse-cdn.com/v4/letter/d/e5b9ba/32.png) [@deltasigma](https://boards.straightdope.com/u/deltasigma)\ **Post date:** [October 1, 2013, 5:56pm UTC](https://boards.straightdope.com/t/s-p-says-i-told-you-so-about-us-credit-rating/670060/51 "2013-10-01T17:56:02Z")
> [@Jonathan\_Chance](#): > > Again, you’re at the point where you say ‘the S&P is irrelevant’ while then citing an article that quotes the S&P. You can’t have it both ways and continuing to do so seriously undermines the seriousness with which others can take your opinion. > > Toss in your dismissal of the ‘sovereign debt’ and you’re really becoming wrong all around. I’d advise some education before trying to participate in these threads. Sovereign debt and (honestly) debt ratings can have serious impact on bonds and capital motion. If for nothing else that certain bond holders are required to only invest in very high grade bonds. Should treasuries drop below that point - which I doubt but your quote in the OP mentions as an unlikely but possible scenario - suddenly the number of places that money can go will shrink enormously. I think people here need some legal training so as to be capable of using sources of evidence without feeling obliged to marry them. I can recognize the expertise of S&P in gauging the importance of the various factors that go into their ratings and cite them for the purpose of saying that yes, this factor which they highlight is indeed important. I can do that w/o going further and claiming that their ratings will necessarily have any particular market effects. In fact, as has already been pointed out, sovereign debt rating don’t reveal any new information. They merely quantify what is already known. To the extent they have any value, that is where it lies. ---
**Author:** ![newcomer](https://avatars.discourse-cdn.com/v4/letter/n/e5b9ba/32.png) [@newcomer](https://boards.straightdope.com/u/newcomer)\ **Post date:** [October 1, 2013, 6:09pm UTC](https://boards.straightdope.com/t/s-p-says-i-told-you-so-about-us-credit-rating/670060/52 "2013-10-01T18:09:28Z")
I think S&P article is somewhat misleading in tying together – even if only via news release - Government Shutdown and defaulting of US Government on its obligations. They are not correlated – at all. Looks more like political posturing increasingly irrelevant. On top of that, chances of US Government defaulting on its obligations are between zero and nill. In some respects, the amount of debt held by foreigners is almost insuring that US can do almost anything and still be regarded as most trusted and reliable in when it comes to sovereign debt. In short, it’s virtually impossible to happen and in risk lingo it means “no risk”. And Reuters agrees - [http://www.reuters.com/article/2013/09/29/us-usa-debt-asia-analysis-idUSBRE98S0GY20130929](http://www.reuters.com/article/2013/09/29/us-usa-debt-asia-analysis-idUSBRE98S0GY20130929) ---
**Author:** ![Inigo\_Montoya](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/inigo_montoya/32/124_2.png) [@Inigo\_Montoya](https://boards.straightdope.com/u/Inigo_Montoya)\ **Post date:** [October 1, 2013, 6:17pm UTC](https://boards.straightdope.com/t/s-p-says-i-told-you-so-about-us-credit-rating/670060/53 "2013-10-01T18:17:58Z")
I have been impolite I think in ignoring the OP’s main point which is to solicit opinions regarding whether S&P would downgrade the USA’s credit rating should a default occur. Is that right? If that’s the crux of the gist, I’d give 2 answers: 1) well, that’s what they said they’d do alright. And 2) who cares? The USA gets a bad credit score and…what? China exercises some clause and demands full payment right now? And then what? USA graciously says, “OK, but no more borrowing from you! In fact…” \* at this point USA aims its wand at China and utters the curse: “EMBARGO!” Next thing you know China is back to the 19th century and some other up-and-coming federation starts wooing us for a new credit relationship. disclaimer: I don’t have any idea what I’m on about, but I think it’d be awesome if “EMBARGO” and “TARRIFY” were actual government-level curses. 🙂 ---
**Author:** ![deltasigma](https://avatars.discourse-cdn.com/v4/letter/d/e5b9ba/32.png) [@deltasigma](https://boards.straightdope.com/u/deltasigma)\ **Post date:** [October 1, 2013, 6:18pm UTC](https://boards.straightdope.com/t/s-p-says-i-told-you-so-about-us-credit-rating/670060/54 "2013-10-01T18:18:03Z")
> [@](#): > > **newcomer** : {quote function not working}I think S&P article is somewhat misleading in tying together – even if only via news release - Government Shutdown and defaulting of US Government on its obligations. They are not correlated – at all. Looks more like political posturing increasingly irrelevant. > > On top of that, chances of US Government defaulting on its obligations are between zero and nill. In some respects, the amount of debt held by foreigners is almost insuring that US can do almost anything and still be regarded as most trusted and reliable in when it comes to sovereign debt. In short, it’s virtually impossible to happen and in risk lingo it means “no risk”. > > And Reuters agrees - [http://www.reuters.com/article/2013/…98S0GY20130929](http://www.reuters.com/article/2013/09/29/us-usa-debt-asia-analysis-idUSBRE98S0GY20130929) First, the two are obviously related by cause - govt dysfunction. How that is not obvious to you I can’t even imagine. Second, Asia being hostage to our debt is irrelevant to the possibility of a default. If anything, knowing that people will still buy our debt makes one more likely. Tell me those dots were really that hard to connect. ---
**Author:** ![deltasigma](https://avatars.discourse-cdn.com/v4/letter/d/e5b9ba/32.png) [@deltasigma](https://boards.straightdope.com/u/deltasigma)\ **Post date:** [October 1, 2013, 6:23pm UTC](https://boards.straightdope.com/t/s-p-says-i-told-you-so-about-us-credit-rating/670060/55 "2013-10-01T18:23:50Z")
> [@The Great Sun Jester](#): > > I have been impolite I think in ignoring the OP’s main point which is to solicit opinions regarding whether S&P would downgrade the USA’s credit rating should a default occur. Is that right? > > If that’s the crux of the gist, I’d give 2 answers: 1) well, that’s what they said they’d do alright. And 2) who cares? The USA gets a bad credit score and…what? China exercises some clause and demands full payment right now? And then what? USA graciously says, “OK, but no more borrowing from you! In fact…” \* at this point USA aims its wand at China and utters the curse: “EMBARGO!” Next thing you know China is back to the 19th century and some other up-and-coming federation starts wooing us for a new credit relationship. > disclaimer: I don’t have any idea what I’m on about, but I think it’d be awesome if “EMBARGO” and “TARRIFY” were actual government-level curses. 🙂 And now the quote function is working again. If the question is why should we bother trying to avoid a default, one obvious reason is the cascade effect it would have in the derivatives markets. It would, I assume, trigger any CDSs written again US sovereign debt. Those are probably written against very thin if not diaphanous reserves so it could cause a collapse similar to what we saw when Lehman went down. That’s just speculation on my part since I have no idea how much in CDSs is written on US debt but I imagine there has to be some out there. But that’s just one example. I’m sure I can come up with more if the rest of you lack the imagination. ---
**Author:** ![msmith537](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@msmith537](https://boards.straightdope.com/u/msmith537)\ **Post date:** [October 1, 2013, 6:30pm UTC](https://boards.straightdope.com/t/s-p-says-i-told-you-so-about-us-credit-rating/670060/56 "2013-10-01T18:30:52Z")
> [@deltasigma](#): > > As for sparring with you, I can find more amusing ways to be bored. Could you share them with us? Because this particular way is pretty boring for us all. ---
**Author:** ![Jonathan\_Chance](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jonathan_chance/32/701_2.png) [@Jonathan\_Chance](https://boards.straightdope.com/u/Jonathan_Chance)\ **Post date:** [October 1, 2013, 6:37pm UTC](https://boards.straightdope.com/t/s-p-says-i-told-you-so-about-us-credit-rating/670060/57 "2013-10-01T18:37:24Z")
> [@The Great Sun Jester](#): > > disclaimer: I don’t have any idea what I’m on about, but I think it’d be awesome if “EMBARGO” and “TARRIFY” were actual government-level curses. 🙂 Fun fact! ‘Embargo’ is ‘Ograbme’ spelled backwards! Learned that from a 1800s political cartoon, I did. Fun, fun. ---
**Author:** ![newcomer](https://avatars.discourse-cdn.com/v4/letter/n/e5b9ba/32.png) [@newcomer](https://boards.straightdope.com/u/newcomer)\ **Post date:** [October 1, 2013, 6:37pm UTC](https://boards.straightdope.com/t/s-p-says-i-told-you-so-about-us-credit-rating/670060/58 "2013-10-01T18:37:46Z")
> [@deltasigma](#): > > First, the two are obviously related by cause - govt dysfunction. How that is not obvious to you I can’t even imagine. > > Second, Asia being hostage to our debt is irrelevant to the possibility of a default. If anything, knowing that people will still buy our debt makes one more likely. Tell me those dots were really that hard to connect. I think you’re mixing Government Shutdown and Debt Ceiling breach. ---
**Author:** ![deltasigma](https://avatars.discourse-cdn.com/v4/letter/d/e5b9ba/32.png) [@deltasigma](https://boards.straightdope.com/u/deltasigma)\ **Post date:** [October 1, 2013, 6:45pm UTC](https://boards.straightdope.com/t/s-p-says-i-told-you-so-about-us-credit-rating/670060/59 "2013-10-01T18:45:56Z")
> [@newcomer](#): > > I think you’re mixing Government Shutdown and Debt Ceiling breach. If I missed the point you were trying to make, apologies but even re-reading it, if you weren’t objecting to the two issues being connected, I’m still not seeing what you were trying to say,. ---
**Author:** ![newcomer](https://avatars.discourse-cdn.com/v4/letter/n/e5b9ba/32.png) [@newcomer](https://boards.straightdope.com/u/newcomer)\ **Post date:** [October 1, 2013, 6:56pm UTC](https://boards.straightdope.com/t/s-p-says-i-told-you-so-about-us-credit-rating/670060/60 "2013-10-01T18:56:10Z")
> [@deltasigma](#): > > If I missed the point you were trying to make, apologies but even re-reading it, if you weren’t objecting to the two issues being connected, I’m still not seeing what you were trying to say,. Government shutdowns happened before and there was no change in US Sovereign debt rating. Also, economy was in a worse state before and there was no change in US Sovereign debt rating. Now, what’s your point? [Previous page](https://boards.straightdope.com/t/s-p-says-i-told-you-so-about-us-credit-rating/670060.md?page=2) [Next page](https://boards.straightdope.com/t/s-p-says-i-told-you-so-about-us-credit-rating/670060.md?page=4)