What are the odds that Congress manages to screw up the US credit rating again?

Setting aside my liberal bias, I don’t really care who you think was at fault last time or who you think will be at fault this time. The fact of the matter is that the reasons S&P gave for the downgrade 2 years ago, the majority of them, revolved around the fact that our govt had ceased to function. Now two years later, nothing has changed. If anything, the situation is now worse. This last session Congress passed 15 bills.

Jesus fucking Christ how pathetic is that. You could elect a mannequin from your district next election and get about the same result.

So now Congress will be off for their summer vacation and when they come back will have 9 whole days to see the light and have their ‘come to Jesus’ moment. Nine whole days to convince the world and the global financial community that they aren’t a bunch brain dead toddlers prepared to drive their Big Wheels off nearest fiscal cliff.

Who’s feeling lucky?

It’ll get worse before it gets better. No clue how the credit rating agencies will go though.

A very wise friend of mine commented that nothing in DC is going to change until the next census, at which hopefully redistricting will encourage some moderation in our elections. I’m not holding my breath, but his analysis seems sound.

Because as broken as Congress is, the House is waaaaaay more broken than the branch as a whole.

And a sweet 80s soundtrack to boot.

Boehner says Congress should be judged by how many laws it repeals, not how many laws it passes. OK, John, let’s see… number of successful repeals would be… zero.

It looks like cooler heads will prevail on the debt ceiling, they are walking back the threat to slit the throat of the economy unless we sacrifice Obamacare. I’d like to see Obama call the GOP’s bluff and refuse to negotiate over the debt ceiling. But what will happen will be some token cuts in exchange for the ceiling lift.

The thing is, didn’t Obama try that the first time around and get ass raped? My impression is that extremism begets extremism. The first time he tried to compromise and kept getting backed into a corner only for Boehner to then brag to the faithful how he got everything he wanted. So the next time around Obama was force to essentially say, fuck you and force a stand off.

But I’ll admit I don’t really pay much attention to politics until it becomes a matter of economics.

Short of an actual default, what the hell does the credit rating of the US actually matter?

Remember the S&P downgrade? Do you remember the actual effects of the downgrade? Zilch. Nada. Nothing.

Nothing changed in the ability of the US to borrow money nor to the interest charged to do so. In fact, we’re essentially borrowing money for free right now. If that’s due to the downgrade, what would have been the alternative? That people are paying us to borrow their money (actually, this sort of already happened, too)?

S&P also downgraded Japan a while back. Know what happened there? Nothing. Japan is also borrowing at historically low interest rates.

Fuck credit ratings. It’s not credit ratings you should be worried about. It’s the actual ability to borrow money and transact business. And the if US ever defaults, then we should be worried. Not because of a (provably) worthless assessment by incompetent credit ratings bureaus on perceived credit worthiness but because of the actual impact of welching on a debt.

Just my impression but while there is still a lot of kicking and flailing, the desire to drive the country into the ground just to fuck with Obama or prove some sort of point seems to have passed.

Just coming in to post this almost exact thing.

For all of the deficit hysteria, the world still loves US Treasury bonds.

Where else is that money going to go? I think the US has one of the few economies with actual growth, and Treasuries are probably the only market capable of absorbing the volume of cash that they do soak up.

So your logic is that S&P, Moody’s and Fitch are irrelevant? Maybe that was true the first time but do you really want to bet it will also be true the second or the third? And is this a question we should even have to be asking. Personally I don’t think we should.

Not that it should matter what happens to the phony concept of a credit rating for the US, but it is assured that congress will screw it up, because they already have and they couldn’t do enough to undo the economic damage already done even if the state of the economy could somehow be accurately reflected in a credit rating.

It’s not strictly the state of the economy but the risk of default, and granted, the difference between the highest and next highest rating is probably not something anyone is going to lose sleep over. It’s not like you’re approaching the cutoff between investment and non-investment grade. It’s also not like Moody’s and Fitch followed S&P’s lead. They *only *gave a negative outlook rather than an outright downgrade.

'cuz it is very important to pass as many bills as possible.

Yes. Because they are irrelevant. As mentioned before, Japan was downgraded with no ill effect. Canada - the same. Australia - the same. Notice a pattern here?

The value behind a credit ratings bureau is to tell you something you may not already know about the credit-worthiness of a business or government, factoring in such things as pending legislation and past behavior.

Of what possible predictive utility is a credit rating on the US government. Or on any G-8 nation, really? That kind of thing makes sense for corporations or small countries - people can’t research everything. But for the US? Financial legislation and past behavior of major governments if front fucking page news. You’d have to be a casual investor from Jupiter to avoid such news.

So, they lower the US credit rating. Is that in response to a default? If so, I don’t need a credit rating agency to tell me there’s a Big Fucking Problem. If not, what are they basing their numbers on? A crystal ball? If Congress is threatening default, I don’t need a credit rating to tell me there’s a problem. I just read the paper.

They’ve gotten it wrong for several nations in the past. Their track record is shit at rating the credit worthiness of major nations. And you can match their predictive record better by reading the newspaper.

So, why the focus on the middle man? Cut him out and watch the evening news.

Do you just make this shit up? From what I can tell everyone you list but Japan is AAA - the highest rating. Japan is irrelevant since most of their debt is held internally. The yield on their 10 year is barely .8%.

edit: Oh, and I guess you missed the part where I said ‘second and third time.’

:smack: Moron

The first time Boehner had agreed in principle to a grand bargain. The White House agreed, then Congressional Democrats went apeshit through back channels and Obama brought Boehner back in for more negotiation at which point Obama requested more revenue than Boehner had initially agreed to, and no grand bargain was struck. Instead we got the super committee/sequester deal and we see how that turned out.

They aren’t irrelevant but I think their power vis-a-vis the United States is less than would be assumed. A company being downgraded, especially to below investment grade, is a serious thing. It significantly raises their borrowing costs and can even cause investors to flee the stock in panic. Similarly sub-national sovereigns like States and sub-State government entities like municipalities can be in bad shape if their credit is downgraded because it will actually increase their borrowing costs. But it appears that the United States and its treasury securities became no less attractive based on S&P’s analysis, and in fact we continued to borrow at historically low interest rates after the downgrade.

The downgrade only matters if investors have somewhere else to park their money. When we’re talking about treasury securities, if you’re wanting money in some sort of ultra-stable fixed income investment and you’ve chosen treasury securities what form of debt is more trustworthy? Euro-denominated government bonds? Hardly. Plus there’s a question of scale.

People have talked about fleeing treasuries for more “exotic” foreign debt issuance like Swiss government bonds or even getting out of dollar denominated assets into Swiss Franc denominated assets. The problem is, only so many people can do that. The total value of all Swiss Franc denominated assets is tiny compared to the total of all treasury securities out there (and basically non-existent compared to the total of all dollar denominated assets.) The only game in town that could even theoretically have enough out on the market to replace treasuries would be perhaps Euro denominated bonds, but they are considered riskier because of the ongoing Eurozone troubles and fears of contagion spreading.

He said “Canada was downgraded with no ill effect.” He didn’t speak as to their current credit rating. Canada was downgraded by S&P from AAA to AA+ in 1992. In 1994 Moody’s downgraded Canada from Aaa to Aa1, and again from Aa1 to Aa2 in 1995.

I don’t know the history of Australian ratings, maybe he was wrong on that. But he was right that the downgrades had minimal impact on Canada. People knew Canada was on an unsustainable path in the 90s–and amazingly Canada basically fixed those problems and are a country I really envy right now for their fiscal position. There has been no real noticeable problems for Japan, the United Kingdom, or the United States when their credit ratings were downgraded. It’s also not all that relevant if Japan’s debt is internal or external. What’s relevant is whether investors want to buy it. If for some reason Japanese debt was seen as undesirable then Japanese citizens can buy other fixed income investments, there’s no rule saying they have to keep their money in Japanese bonds.

The majority of U.S. debt is held stateside, too.

Martin Hyde already address most of this, but what does the provenance of the debt matter towards credit worthiness? And to re-iterate his point, most US debt is held internally, too. Just not as high a percentage as Japan.

Also, credit ratings are hardly static. They change with time. Japan is currently top rated. It wasn’t always thus. The credit ratings agencies get it wrong and then fix their ratings eventually or the country comes out of a recession and their credit-worthiness is no longer an issue.

Why is this a good thing when the ratings agencies screwed up in the first place?

Why should they get second and third chances when they were hilariously wrong the first time?

Everybody can play this game:

I, the Great Antibob predict the sun will explode tomorrow.

It didn’t happen. Ok, I, the Great Antibob predict the sun will explode the day after that.

It didn’t happen. Ok, I, the Great Antibob predict the sun will explode the day after that.

Sure, I’ll eventually be right after billions of tries. That doesn’t mean I have any special knowledge into the workings of the sun because my wacky guess ended up being right one time out of several.

With multiple chances, any naysayer will eventually get a prediction right through sheer perverse chance. It doesn’t mean there’s any special knowledge or insight involved. Until you can show that credit ratings agencies have some horrific power over the credit extended toward sovereign nations with debt denominated their own currency or can affect investor confidence in the same to any real extent, again, I ask “What does a credit ratings agency’s opinion really matter when the same information is gleaned rather easily from the papers?”