According to this article:
http://www.reportonbusiness.com/servlet/story/RTGAM.20080917.wusrating0917/BNStory/Business/home
The US government MAY be in danger of losing its AAA credit rating:
For debate:
Is there any realistic chance that the US Government will have its credit rating downgraded in the near - mid term (i.e. within a year)
If so, does it matter at all? Will the result simply be that the cost to insure U.S. Treasury debt against default will simply increase?
Hey, I wouldn’t lend the government money.
Oh, wait…
Fucking ratings companies. Bastards left high ratings on companies buying shitloads of sub-prime mortgage debt for years. AIG’s ratings were consistently high, they’re currently rated AA+ by S&P by the way, and were rated AAA on Monday. The ratings companies were the free market’s watchdogs to prevent the credit crisis and they majorly failed in their role. If one of them is talking tough now I’m giving it a big :dubious:
The dumbasses at major investment banks buying all those sub-prime mortgages are the major cause of this crisis, the ratings companies who stamped AA+ on those mortgages are a close second.
Enjoy,
Steven
Has the US gov’t ever defaulted on a debt? I rather doubt it has, at least not in the last century. And current events aside, our debt to GDP ratio is pretty much in the middle of other western industrialized nations. I think Chambers is just BSing.
Sort of ironic watching Standard and Poor blustering about how they’re going to be vigilant about not just blindly handing out good credit ratings though. There was a time when that attitude would’ve saved us a lot of trouble.
This is more or less what I thought…
So is this mostly posturing by Chambers to show how “tough” they’re going to be on ratings in the future?
Yeah, just like the sub-prime mortgage backed securities earned it.
Assholes.
What I don’t understand is this: According to the article, you need to pay $26,000.00 to get insurance against $10,000,000.00 worth of defaults on US bonds.
But realistically, if the world gets to a point where the US defaults on its bonds, how likely is the insurer to be able to come up with $10,000,000?
It might be rather simple, since at that point, a potato would probably sell for $9,000,000.00
Perhaps, but that only underscores how (seemingly) pointless it is to lay down $26,000.00 in reasonably good money today against the possibility of getting $1.98 worth of 2008 dollars in 10 years.
If the gummit runs the lending companies they’re outperformed, if the private sector does the CEO’s drive it like it’s a stolen vet, either way we poor schmoes are the ones fucked in the end.
There is no doubt in my mind, under Republican control, the regulations lapsed contributing to this crisis. There is also no doubt in my mind too much regulation hurts our competetiveness abroad.
Why don’t we have a bipartisan chairman for lending companies with powers similar to the Fed. Res. chair who has the job for life?
I do not think it is impossible. The Fannie and Freddie bailout potentially exposes the U.S. to five trillion dollars worth of iffy mortgage underwriting. $5,000,000,000,000.
If the U.S. goes at all below AAA, this immediately adds (WAG) billions to the borrowing costs for the Government. Lower investment grade instruments need to offer premiums over the rates a AAA issuer can get away with.
This is pretty big if it happens, and I don’t think the discussion of it is pure BS.
Dumbass Greenspan with his cheap credit and dumbass Bernanke (“we’ll drop money from helicopters if we have to”) are a large part of the reason things look the way they do today. Unelected “bipartisan” czars are not always a particularly good answer, either, it seems.
Fortune magazine ran several articles within the past year as to the top ten best buys, and best buys for 2008. Two companies on their lists? AIG and Merrill Lynch.
According to this article, if you decided to invest according to the articles, your portfolio’s value would be down 93 percent right now.
The cynic in me says investment bankers and counselors know far more than they tell prospective clients and only want your money to cover their mistakes and churn your money for the fees.
Short version is no. This would make a great Cecil question. The longer version would be there are probably exceptions, such as ignoring the judgments of courts, but I couldn’t cite one.
I think you’re right. U.S. debts are backed by the “full faith and credit” of the Government. It’s a pretty huge priority to make sure that guarantee remains as shiny and trustworthy as it can.
I alluded before to the massive increase in borrowing costs that the U.S. would face if it lost even a little of its AAA status. An actual default would be catastrophic – sovereign defaults take years to recover from, reputation wise.
Additionally, countries that have difficulty paying their debts also often have difficulty attracting inward investment. Governments that are so strapped for cash that they struggle to pay their bondholders are often governments that start thinking about desperate measures like confiscatory taxation, seizing foreign companies’ assets, etc.
It’s pretty meaningless in my opinion. Should the U.S. ever default on its debt, it would turn the world economy into chaos, all of our money would be worthless, mechanisms of trade would grind to a halt, and we would revert to cannibalism to survive. Well maybe not the last one, for at least a few years…
Look lads, I’m going fast, and I’ve got a gammy leg, so you’d better… eat me.