# U.S. gets another credit downgrade **URL:** \ **Category:** Politics & Elections\ **Created:** [September 15, 2012, 1:38am UTC](https://boards.straightdope.com/t/u-s-gets-another-credit-downgrade/634750 "2012-09-15T01:38:32Z")\ **Posts on this page:** 13\ **Page:** 2
**Author:** ![gamerunknown](https://avatars.discourse-cdn.com/v4/letter/g/6bbea6/32.png) [@gamerunknown](https://boards.straightdope.com/u/gamerunknown)\ **Post date:** [September 15, 2012, 9:47am UTC](https://boards.straightdope.com/t/u-s-gets-another-credit-downgrade/634750/21 "2012-09-15T09:47:33Z")
> [@moonshot925](#): > > Historically we have high taxes right now. [Suddenly](http://en.wikipedia.org/wiki/File:USTaxRevenue1945-2011.jpeg), [there](http://en.wikipedia.org/wiki/File:MarginalIncomeTax.svg) were [charts](http://en.wikipedia.org/wiki/File:Federal_receipts_by_Source_Historical_1950-2010.jpg) [everywhere](http://en.wikipedia.org/wiki/File:Chart_1.png)! ---
**Author:** ![MandaJo](https://avatars.discourse-cdn.com/v4/letter/m/ac91a4/32.png) [@MandaJo](https://boards.straightdope.com/u/MandaJo)\ **Post date:** [September 15, 2012, 9:55am UTC](https://boards.straightdope.com/t/u-s-gets-another-credit-downgrade/634750/22 "2012-09-15T09:55:06Z")
I have a question, since there’s a lot of people here who know about the Fed: Romney recently said that if elected, he would replace Bernake as Fed Chairman. Isn’t there a really, really strong convention against that? I thought the idea was to keep the position as non-political as possible, which is why there are 14-year terms for the Board of Governors, and that while the Chairman slot was renewed more often, it was generally considered very poor form to push someone out–Greenspan was appointed by Regan, for example, but confirmed by Clinton. ---
**Author:** ![RickJay](https://avatars.discourse-cdn.com/v4/letter/r/bb73d2/32.png) [@RickJay](https://boards.straightdope.com/u/RickJay)\ **Post date:** [September 15, 2012, 12:30pm UTC](https://boards.straightdope.com/t/u-s-gets-another-credit-downgrade/634750/23 "2012-09-15T12:30:14Z")
Are these the same rating agencies that gave AAA ratings to hopelessly doomed subprime mortgage instruments right up tothe day before they collapsed? The same rating agencies that gave AAA ratings to such instruments better ratings than they do to rich sovereign governments? The same ratings agencies that, apparently, continue on as if the debacle of 2008 never happened? Like as if they were paid by the very banks whose investments they rate as safer than the government of the United States even after the 2008 meltdown? Oh, they are? Just checking. ---
**Author:** ![Gorsnak](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/gorsnak/32/7587_2.png) [@Gorsnak](https://boards.straightdope.com/u/Gorsnak)\ **Post date:** [September 15, 2012, 4:06pm UTC](https://boards.straightdope.com/t/u-s-gets-another-credit-downgrade/634750/24 "2012-09-15T16:06:22Z")
> [@Omg\_a\_Black\_Conservative](#): > > Furthermore, a weaker dollar doesn’t mean it’s easier for the U.S. to pay back it’s obligations, since a decrease in credit rating means that the U.S. will have to pay higher interest rates on its debt. A weaker dollar _does_ mean it’s easier for the US to pay back its obligations. You can argue that a weaker dollar will correlate with other factors that will mitigate that, but you can’t argue that a weaker dollar won’t make it easier to pay down the debt. Moreover, there’s no necessary connection between the dollar being weaker and interest rates rising (note that credit rating fluctuations here are utterly meaningless except insofar as they actually have causal impact on T-bill yields.) In the long run, a weaker dollar should eventually lead to higher inflation, and higher inflation should increase interest rates. But even that doesn’t make your argument. You need the weaker dollar to specifically inflate the borrowing costs of the US government, and so far in spite of everything it seems that investors still see US debt as the safest place bar none to park money. Even compared to the government debt of countries with AAA ratings and no recent history of playing political football with their debt. So long as that’s the case, US borrowing costs will remain rock bottom. ---
**Author:** ![Jorge\_Burrito](https://avatars.discourse-cdn.com/v4/letter/j/e9bcb4/32.png) [@Jorge\_Burrito](https://boards.straightdope.com/u/Jorge_Burrito)\ **Post date:** [September 15, 2012, 4:30pm UTC](https://boards.straightdope.com/t/u-s-gets-another-credit-downgrade/634750/25 "2012-09-15T16:30:14Z")
> [@MandaJo](#): > > I have a question, since there’s a lot of people here who know about the Fed: Romney recently said that if elected, he would replace Bernake as Fed Chairman. Isn’t there a really, really strong convention against that? I thought the idea was to keep the position as non-political as possible, which is why there are 14-year terms for the Board of Governors, and that while the Chairman slot was renewed more often, it was generally considered very poor form to push someone out–Greenspan was appointed by Regan, for example, but confirmed by Clinton. You are correct in your understanding, but if a president truly feels the current chairman is doing a horrible job I think it is reasonable that he would replace him, strong convention or not. The chairman comes from the current board of governors, so Romney’s choice are limited to seven people. ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [September 15, 2012, 4:45pm UTC](https://boards.straightdope.com/t/u-s-gets-another-credit-downgrade/634750/26 "2012-09-15T16:45:45Z")
> [@Omg\_a\_Black\_Conservative](#): > > A weaker dollar is great for exporters, banks and the stock market (the past few days is a good example of the latter), but bad for everyone else as it causes the price of commodities to rise. It also makes domestically manufactured goods more competitive, which on the whole makes the whole thing a push. ---
**Author:** ![MandaJo](https://avatars.discourse-cdn.com/v4/letter/m/ac91a4/32.png) [@MandaJo](https://boards.straightdope.com/u/MandaJo)\ **Post date:** [September 15, 2012, 5:41pm UTC](https://boards.straightdope.com/t/u-s-gets-another-credit-downgrade/634750/27 "2012-09-15T17:41:44Z")
> [@Jorge\_Burrito](#): > > You are correct in your understanding, but if a president truly feels the current chairman is doing a horrible job I think it is reasonable that he would replace him, strong convention or not. The chairman comes from the current board of governors, so Romney’s choice are limited to seven people. Except that he gets to appoint one of those people every two years, and presumably would his appointee to be chair. ---
**Author:** ![moonshot925](https://avatars.discourse-cdn.com/v4/letter/m/f0a364/32.png) [@moonshot925](https://boards.straightdope.com/u/moonshot925)\ **Post date:** [September 15, 2012, 11:28pm UTC](https://boards.straightdope.com/t/u-s-gets-another-credit-downgrade/634750/28 "2012-09-15T23:28:49Z")
> [@gamerunknown](#): > > [Suddenly](http://en.wikipedia.org/wiki/File:USTaxRevenue1945-2011.jpeg), [there](http://en.wikipedia.org/wiki/File:MarginalIncomeTax.svg) were [charts](http://en.wikipedia.org/wiki/File:Federal_receipts_by_Source_Historical_1950-2010.jpg) [everywhere](http://en.wikipedia.org/wiki/File:Chart_1.png)! Those are marginal rates. They mean nothing. ---
**Author:** ![LinusK](https://avatars.discourse-cdn.com/v4/letter/l/258eb7/32.png) [@LinusK](https://boards.straightdope.com/u/LinusK)\ **Post date:** [September 16, 2012, 12:21am UTC](https://boards.straightdope.com/t/u-s-gets-another-credit-downgrade/634750/29 "2012-09-16T00:21:44Z")
> [@septimus](#): > > IMO, OMG is right (though for the wrong reason). Q.E. (and I’m surprised a Doper posting on financial news is unfamiliar with the abbreviation) is a poor substitute for fiscal stimulus, but job-creating stimulus is not possible today due to the GOP’s _“Make sure Obama fails”_ strategy. > > Q.E. can be viewed as replacing long-term government debt with a form of fiat money. That long-term interest rates have not risen can be viewed as something of a mystery, but is due in part to simple supply-demand associated with Q.E. itself: Q.E. buying represents huge “demand” for long bonds. I suspect there is some smart money betting long-term interest rates _will_ rise; can Dopers who follow financial markets comment on that? > > I think rating agencies consider risk of inflation as well as default when rating sovereign bonds. > > Historically, the number of misstatements on the planet has never been higher than it is today. I don’t think it’s a mystery. When the Fed buys bonds it increases reserves. Banks control the reserves, and use them to make loans and buy bonds. Increased reserves means increased demand for bonds. Since banks, collectively, can only shift reserves around, the supply of reserves will remain high as long as the Fed wants it that way. As long as the supply of reserves stays high, interest rates will not rise. ---
**Author:** ![gamerunknown](https://avatars.discourse-cdn.com/v4/letter/g/6bbea6/32.png) [@gamerunknown](https://boards.straightdope.com/u/gamerunknown)\ **Post date:** [September 16, 2012, 1:22pm UTC](https://boards.straightdope.com/t/u-s-gets-another-credit-downgrade/634750/30 "2012-09-16T13:22:10Z")
> [@moonshot925](#): > > Those are marginal rates. Wrong, two showed total tax receipts, which were by no means historically high. Also, we can look at [taxation as a percentage of GDP](http://en.wikipedia.org/wiki/List_of_countries_by_tax_revenue_as_percentage_of_GDP), [PPP per capita](http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28PPP%29_per_capita) and [debt to GDP ratio](http://en.wikipedia.org/wiki/List_of_countries_by_public_debt) and determine that rates of taxation are not good indicators for a country’s solvency. ---
**Author:** ![RTFirefly](https://avatars.discourse-cdn.com/v4/letter/r/c77e96/32.png) [@RTFirefly](https://boards.straightdope.com/u/RTFirefly)\ **Post date:** [September 17, 2012, 3:25pm UTC](https://boards.straightdope.com/t/u-s-gets-another-credit-downgrade/634750/31 "2012-09-17T15:25:20Z")
> [@moonshot925](#): > > Those are marginal rates. They mean nothing. Why don’t you and the IRS argue that one out, and tell me who wins? ---
**Author:** ![dataguy](https://avatars.discourse-cdn.com/v4/letter/d/eada6e/32.png) [@dataguy](https://boards.straightdope.com/u/dataguy)\ **Post date:** [September 17, 2012, 7:49pm UTC](https://boards.straightdope.com/t/u-s-gets-another-credit-downgrade/634750/32 "2012-09-17T19:49:52Z")
> [@Omg\_a\_Black\_Conservative](#): > > Well, it’s been said that liberals don’t understand economics… It’s also been said the economists don’t understand economics. If the did, they would usually agree, just like accountants.[Here’s one view of why that is](http://rodrik.typepad.com/dani_rodriks_weblog/2007/08/why-do-economis.html). ---
**Author:** ![Mollie\_Magill](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/mollie_magill/32/20882_2.png) [@Mollie\_Magill](https://boards.straightdope.com/u/Mollie_Magill)\ **Post date:** [September 17, 2012, 8:44pm UTC](https://boards.straightdope.com/t/u-s-gets-another-credit-downgrade/634750/33 "2012-09-17T20:44:50Z")
> [@Lobohan](#): > > The Dems have gone more than half-way. The Republicans aren’t willing to consider a tax increase when we have historically very low taxes. > > Only someone with no understanding of the issue or an utter partisan can see the Dem’s proposal of twice as many cuts as increases as the Dems being obstructionist. Yes - but once the Democrat party reaches this “halfway point” there’s a new halfway point, which the obstructionist Democrat Party refuses to come to. [Previous page](https://boards.straightdope.com/t/u-s-gets-another-credit-downgrade/634750.md?page=1)