Standard & Poor Changes Outlook for US Debt & Market Falls 2%

Discussion in 'Politics' started by Flopper, Apr 18, 2011.

  1. Flopper
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    Flopper Gold Member

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    The ratings agency Standard & Poor’s warned the United States on Monday that it could lose its coveted status as the world’s most secure economy if lawmakers don’t rein in the nation’s nearly $14.3 trillion debt.

    The finding, the first of its kind in the 60 years that S&P has been judging the country’s credit quality, sent a jolt through the markets and injected a new sense of urgency into the debate gripping Washington over whether to allow the Treasury to keep borrowing.

    S&P changed its outlook on the United States from “stable” to “negative” and said the federal government could lose its AAA rating if officials fail to bring spending in line with revenue.

    The AAA rating identifies the United States as one of the world’s safest investments — and has helped the nation borrow at extraordinarily cheap rates to finance its government operations, including two wars and an expensive social safety net for retirees.

    Stock prices fell nearly 2 percent in the hours after the report’s release before ending the day down about 1 percent. The dollar and Treasury bonds also slid in the wake of the report but recovered by the end of the day.

    Lawmakers on both sides of the deficit debate tried to take advantage of the warning from Wall Street, but that just highlighted the point of the report — which is that the polarization in Washington is the problem.

    “We believe there is a material risk that U.S. policy makers might not reach an agreement on how to address medium- and long-term budgetary challenges by 2013,” S&P said in the report. “If an agreement is not reached . . . this would in our view render the U.S. fiscal profile meaningfully weaker.”

    S&P is one of the nation’s three major rating agencies, whose assessments influence the decisions of investors worldwide. The other two major agencies have not changed U.S. ratings.

    The Obama administration responded to the report by saying that the likelihood of a compromise is greater than the agency realizes. Officials stressed that S&P essentially played the role of political pundit — and its guess was as good as anyone else’s.

    “We believe S&P’s negative outlook underestimates the ability of America’s leaders to come together to address the difficult fiscal challenges facing the nation,” said Mary Miller, assistant Treasury secretary for financial markets. “Addressing the current fiscal situation is well within our capacity as a country.”

    Last week, President Obama laid out a plan to trim $4 trillion from deficits over the next 12 years. On Friday, House Republicans adopted a budget resolution that would cut deficits by $4.4 trillion over 10 years.

    S&P lowers its outlook on U.S. debt; stocks decline - The Washington Post


    S&P is sending a pretty clear message to Congress. We can only hope someone is listening.
     
  2. Avatar4321
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    Avatar4321 Diamond Member Gold Supporting Member

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    But don't worry. We don't have spending problem. We can easily afford spending trillions we don't have. We don't have to cut anything.

    Now if you'll excuse me, there is a hole in the sand with my head's name on it.
     
  3. uscitizen
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    uscitizen Senior Member

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    The market is articificially high anyway, in bubblesville again.
     
  4. Flopper
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    Flopper Gold Member

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    The Deficit Commission plan, Paul Ryan's proposal, and the plan from Deficit Panel scheduled to meet in May will have to be resolved into a bill that both sides can agree on. If nothing else comes out of this, the American public will learn what polarization means and how destructive it can be to the country.
     
  5. waltky
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    waltky Wise ol' monkey Supporting Member

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    Bond market may benefit from warning...
    :eusa_eh:
    S&P warning may end up actually helping U.S.
    4/24/2011 - Threat of downgrade may have made bonds more attractive for investors

     
  6. editec
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    editec Mr. Forgot-it-All

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    Is this the SAME Standard and Poor who told the bond holders that there was no risk associated with the bonds Standard and Poors employers were flogging to the market?
     

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