S&P downgrades US credit rating from AAA

Prefontaine

Prefontaine

Well-Known Member
Ok the problem with us printing more money is this, in our world we have a finite amount of wealth, that is we have a finite amount of time and resources, the dollar simply represents an amount of goods or services (resources or time) that can be traded for and equivalent amount of goods and services, you print more money it takes more money to buy the same goods and services. What the rest of the world is watching for is whether we will try to print our way out of this debt, which is probably going to happen kind of like germany following world war 1, which set the stage for hitler and the national socialist party to take control, "to fix the inflation that those darn jews caused" so just wait we are in for bumpy ride.

now as far as interest rates, we have been in an interest rate bubble for several decades. back when my parents bought their first house they had to buy it on 30% interest, this was in like 72, since then we saw interest rates drop all the way to about 3.5% in the housing market around 2006. anyone else see a problem with that?
 
Prefontaine

Prefontaine

Well-Known Member
no i dont the exact interest rate but I know it was unheard of high in comparison to now, may have been only 18% but criminy
 
txpete77

txpete77

Well-Known Member
Prefontaine said:
no i dont the exact interest rate but I know it was unheard of high in comparison to now, may have been only 18% but criminy
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Interest rates back in the Carter era were around 22%. Home buyers back then would often transfer the seller's mortgage to their name in order to keep from paying a much higher interest rate. This practice is no longer allowed. My parents did this in 81.

Something else to note... higher interest rates is one method the Fed uses to reduce the money supply and reduce or reverse inflation (it will collect more Dollars in interest and 'destroy' them).
 
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NoDrama

Well-Known Member
Only one problem with high interest rates.....The interest is never created. at some point the interest becomes more to pay than the principal and then it is impossible to pay becasue only $1 quadrillion dollars exist, but $2.5 quadrillion dollars are needed to pay it all off. A deficit of $1.5 quadrillion that can never be paid off, instead the debt must continually be rolled over so that money is created to pay the interest payments.

The Fed is not going to raise interest rates any time soon.
 
txpete77

txpete77

Well-Known Member
NoDrama said:
The Fed is not going to raise interest rates any time soon.
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The fed will have to raise rates in order to sell debt. Now that we have been downgraded, the US will have to sell bonds at a higher interest rate than those nations who now hold a better rating.
 
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NoDrama

Well-Known Member
Nope, what will happen is that no one will buy large quantities of long term debt, just short term notes. The Fed will buy all the Debt the USA creates, they don't need to sell anything. Direct monetization....Inflation.

The primary dealers (Big Banks) are the ones who sell treasuries, the Fed is the buyer of last resort and can keep the interest rates at less than 1% for as long as they wish, as long as they are buying all the debt. They already have more of our debt than Germany, China and Japan all rolled together.

IMO that is what you will see happen.
 
mame

mame

Well-Known Member
10 year bonds are DOWN to 2.4%, seems the damage is limited to stocks which could indicate the markets are focused more on the fundamentals of the world economy as opposed to reacting to S&P's move; Otherwise we would've seen interest rates rise not fall, right? The reason I say this, is because this is what happened when they downgraded Japan too - the markets rejected the significance of the downgrade, Japanese bonds remained a popular investment (so interest rates stayed low) but the stock market still fell.
 
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NoDrama

Well-Known Member
The FOMC meeting isn't until Thursday, if they call an emergency meeting then it causes markets to react unfavorably. We will see if they hint at QE3 then. I assume they will.
 
BendBrewer

BendBrewer

Well-Known Member
Some interesting perspectives on S&P:

http://curiouscapitalist.blogs.time.com/2011/08/08/why-congress-and-sp-deserve-each-other/?hpt=hp_t2

Why Congress and S&P Deserve Each Other



Having Standard & Poor's downgrade the creditworthiness of the U.S., and warn the country about further downgrades, is a little like having the Catholic Church lecture Scout leaders on the proper behavior toward boys. The moral authority seems to be wanting. S&P, you may recall, is one of the ratings agencies (the others being Moody's and Fitch) that greased the skids of the financial crisis by awarding AAA ratings to tranche after tranche of mortgage bonds called collaterized debt obligations, or CDOs. Recall that, unlike U.S. Treasuries, backed by the full faith and credit of the U.S., CDOs were underwritten by garbage mortgages — that is, backed by no-documentation “liar loans” and other Alt-A subprime pond scum handed to borrowers who otherwise couldn't get a nickel's worth of credit at their local dry cleaner.
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Banditt

Banditt

Well-Known Member
mame said:
Interest rates are very low right now, so hopefully the impact of S&P's downgrade is minimal (moody's and others still have us at AAA, right?).

Blame the Tea Party; If they allowed Beohner to accept Obama's "grand bargain" the deficit reduction would've made it over the ARBITRARY(but that's a whole different argument) mark of $4 trillion and we would've averted a downgrade. That's right BLAME THE FUCKING EXTREMIST, NO COMPROMISE DICKS

BLAME THE FUCKING TEA PARTY
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Screen shotted for funniness. lol
 
BendBrewer

BendBrewer

Well-Known Member
Yet it has occurred to me that maybe S&P has a point. After all, this is a Congress that let the banking industry run amok, bailed it out with access to trillions of dollars of credit, and has since done precious little to ensure that the process won't be repeated. Nor would Congress reform the ratings industry, which played vital role in the crisis. Nor did it agree a deal worked out between Obama and House Speaker John Boehner that would have preserved the AAA rating. If our Congress is that dumb, perhaps we deserved the downgrade.
 
BendBrewer

BendBrewer

Well-Known Member
How many Tea Baggers in Congress vowed to force the US into Default? This is what happens when you vow not to pay our bills as the Constitution requires.

This is the result of the 2010 elections that sent a bunch of immature cry babies to Washington where they have done NOTHING to help the economy or job market since they have been there. This is the proof that is in the pudding. American voters made huge mistakes in 2010 and now we are lying in that bed.
 
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NoDrama

Well-Known Member
The Ratings agencies don't care about the truth, otherwise we would have known about Enron in the 11th hour, or Worldcom or Sub prime.. Face it, the rating agencies only affirm what we already know. The USA is a sinking ship.
 
mame

mame

Well-Known Member
Banditt said:
Screen shotted for funniness. lol
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How is what I said not true? Ignoring that $4 Trillion is an almost entirely arbitrary benchmark, can you deny that Obama and Beohners "Grand Bargain" - shot down by the extremist Tea Party during negotiations - wouldn't have averted a downgrade by S&P? The Tea Party was the driving force stopping compromise, and Washington's backup plan came up short and we got downgraded because of it. How is that not the Tea Parties fault? Have you been paying attention at all?
 
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NoDrama

Well-Known Member
Blame the Tea Party. Everyone needs a scapegoat. Its not the fault of all the politicians in the last 40 years and profligate spending and unending wars that caused this, oh no , it was the tea party.

get real Mame.
 
BendBrewer

BendBrewer

Well-Known Member
Again, how many members of the Tea Party vowed to force the US into default? When you have the Party that controls the purse strings vow to force the US into default, creditors get a little worried.

We got downgraded because the Tea Party is too simple minded and they do not care about the consequences of their actions. They have said as much, "So Be It."

Well, when you hold the checkbook and you state that you aren't going to live up to promises, "come to grips with the fact that promises have been made that frankly are not going to be kept for many."

And you have a political party demanding economic chaos, "BOEHNER: Well, first they want more. And my goodness, I want more too. And secondly, a lot of them believe that if we get past August the second and we have enough chaos, we could force the Senate and the White House to accept a balanced budget amendment."

This is what happens when people as short sighted as the members of the Tea Party play political games with our economy and the Tea Party got exactly what it deserved. Downgraded. Political chaos is what caused the downgrade. Chaos purposely created by the Tea Party and Republicans for political gain.

America and Americans be damned. And yet people support them.
 
Banditt

Banditt

Well-Known Member
BendBrewer said:
Again, how many members of the Tea Party vowed to force the US into default? When you have the Party that controls the purse strings vow to force the US into default, creditors get a little worried.

We got downgraded because the Tea Party is too simple minded and they do not care about the consequences of their actions. They have said as much, "So Be It."

Well, when you hold the checkbook and you state that you aren't going to live up to promises, "come to grips with the fact that promises have been made that frankly are not going to be kept for many."

And you have a political party demanding economic chaos, "BOEHNER: Well, first they want more. And my goodness, I want more too. And secondly, a lot of them believe that if we get past August the second and we have enough chaos, we could force the Senate and the White House to accept a balanced budget amendment."

This is what happens when people as short sighted as the members of the Tea Party play political games with our economy and the Tea Party got exactly what it deserved. Downgraded. Political chaos is what caused the downgrade. Chaos purposely created by the Tea Party and Republicans for political gain.

America and Americans be damned. And yet people support them.
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Cool story bro. Mind if I put my tinfoil hat back on? lol
 
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NoDrama

Well-Known Member
THE US CANNOT DEFAULT. It is not possible!!!!!! The Fed can print money, we are the reserve currency of the WHOLE WORLD. We cannot default.
 
BendBrewer

BendBrewer

Well-Known Member
You still haven't answered the question.

How many Tea Baggers vowed to force America into default by refusing to sign any debt increase? How do you think Creditors would react.

The House writes the checks. Pelosi never got downgraded. Boehner and the Tea Party just did.
 
beardo

beardo

Well-Known Member
BendBrewer said:
You still haven't answered the question.

How many Tea Baggers vowed to force America into default by refusing to sign any debt increase? How do you think Creditors would react.

The House writes the checks. Pelosi never got downgraded. Boehner and the Tea Party just did.
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None-
The debt ceiling would not make us default. We would have enough revenue to pay off debt and not default.
And as No Drama said we can also print,, or Mint money, and if we wanted we could eliminate our debt compleatly and we could also eliminate the need to pay intrest on our dollars but that is another discussion.
 
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