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S&P Affirms US AAA Rating, Cuts Outlook to Negative

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  • S&P Affirms US AAA Rating, Cuts Outlook to Negative

    Published: Monday, 18 Apr 2011 | 9:35 AM ET

    Standard & Poor's on Monday downgraded the outlook for the United States to negative, saying it believes there's a risk U.S. policymakers may not reach agreement on how to address the country's long-term fiscal pressures.

    "Because the U.S. has, relative to its 'AAA' peers, what we consider to be very large budget deficits and rising government indebtedness and the path to addressing these is not clear to us, we have revised our outlook on the long-term rating to negative from stable," the agency said in a statement.

    The S&P said the move signals there's at least a one-in-three likelihood that it could lower its long-term rating on the United States within two years.

    The U.S. dollar fell broadly on word of the revision. Gold prices, meanwhile, hit a new record above $1,496 an ounce.

    "The headline has enough of a shock value. The initial reaction is that this is negative for dollar assets across the board." said Lou Brien, a market strategist with DRW Trading in Chicago.
    Facts do not cease to exist because they are ignored. -- Aldous Huxley
    Two things are infinite: the universe and human stupidity. -- Albert Einstein

  • #2
    And so it begins....
    Originally posted by kontemplerande
    Without Germany, you would not have won World War 2.

    Comment


    • #3
      International concern over the US's credit rating could cause wealthy people to be more accepting of tax increases.
      Facts do not cease to exist because they are ignored. -- Aldous Huxley
      Two things are infinite: the universe and human stupidity. -- Albert Einstein

      Comment


      • #4
        Originally posted by DAL View Post
        International concern over the US's credit rating could cause wealthy people to be more accepting of tax increases.
        I don't think anyone will entertain tax increases as a viable option until Congress and the President demonstrate an ability to actually cut spending in a significant way. Raising taxes right now would be like giving an alcoholic just one more beer....
        Originally posted by kontemplerande
        Without Germany, you would not have won World War 2.

        Comment


        • #5
          Originally posted by SRT936 View Post
          I don't think anyone will entertain tax increases as a viable option until Congress and the President demonstrate an ability to actually cut spending in a significant way. Raising taxes right now would be like giving an alcoholic just one more beer....
          Probably not, but those who pay little or no income tax usually seem to be in favor of raising taxes on the "wealthy" (i.e., those who make more money than they do).
          Facts do not cease to exist because they are ignored. -- Aldous Huxley
          Two things are infinite: the universe and human stupidity. -- Albert Einstein

          Comment


          • #6
            The 'hood is all a-giggitty over the rise in gold prices.

            In talking with a woman this week, she was almost delirious that she was sporting over $1k in gold. As soon as I mentioned the homeboy shopping network probably making her a future target of a strongarm robbery, her face sunk with the realization.
            NRA Life Member

            The police are the public and the public are the police; the police being only members of the public who are paid to give full time attention to duties which are incumbent on every citizen in the interests of community welfare and existence. - Sir Robert Peel

            Every normal man must be tempted at times to spit on his hands, hoist the black flag, and begin to slit throats. - H. L. Mencken

            Comment


            • #7
              Originally posted by Sgt. Slaughter View Post
              The 'hood is all a-giggitty over the rise in gold prices.

              In talking with a woman this week, she was almost delirious that she was sporting over $1k in gold. As soon as I mentioned the homeboy shopping network probably making her a future target of a strongarm robbery, her face sunk with the realization.
              The transaction costs involved in buying and selling gold will very likely swamp her profits. I wonder if she was a Glenn Beck listener.
              Facts do not cease to exist because they are ignored. -- Aldous Huxley
              Two things are infinite: the universe and human stupidity. -- Albert Einstein

              Comment


              • #8
                We need to get a grip. This is seriously not a time for political games or 'feel-good' policies. I have no faith that anyone in Washington has the interests of the country over the interests of their party.

                Comment


                • #9
                  Not only do our politicians care only about their self interest, they don't know how to solve the problem.
                  Facts do not cease to exist because they are ignored. -- Aldous Huxley
                  Two things are infinite: the universe and human stupidity. -- Albert Einstein

                  Comment


                  • #10
                    Originally posted by PoliceProspect View Post
                    We need to get a grip. This is seriously not a time for political games or 'feel-good' policies. I have no faith that anyone in Washington has the interests of the country over the interests of their party.
                    alot of people do not have the grips. i do have gripes about those kind of people. there are people out there that they think they float on clouds above us. dont try to turn the table on me. please.i already knew.
                    Last edited by OfficerDotCom; 04-18-2011, 01:49 PM. Reason: removing insult; DON'T post personal insults.
                    break censorship chains

                    Comment


                    • #11
                      Originally posted by SRT936 View Post
                      And so it begins....
                      ++
                      Yeah. That would go poorly. Like, on the Scale of Fail, somewhere between "Titanic" and "Chernobyl."
                      --Squirrel

                      Comment


                      • #12
                        UBS Analysis

                        Political progress unlikely

                        We have written extensively about our skepticism that Congress and the White House will come to an agreement on any meaningful cuts in government spending. As discussed in our piece, Washington Watch: Levering the Debt Ceiling published 13 April, the outstanding amount of debt is already nearly at the debt ceiling. The fractious environment in Washington, the recently passed but very tardy 2011 funding bill, and the potential to hit the debt ceiling underscore Washington’s inability to make progress. While President Obama, Representative Ryan, the Deficit Commission and many others have proposals to lower the long term spending obligations of the US government, we share S&P’s concern that legislators are unlikely to pass meaningful reform proposals, which necessarily must address entitlements and the tax code. We expect the political climate in Washington will remain rancorous and that while fiscal issues will remain front and center, they will not in any way be resolved over the next few years. S&P’s actions today serve as a wake up call, but not an unexpected one.

                        The US is not alone

                        While the US is not the only AAA-rated country to face fiscal challenges, S&P notes that it has been slower to respond to rising debt burdens than its peers. The UK, France, and Germany have already implemented fiscal consolidation, while the US has yet to come to an agreement more than two years after the financial crisis. S&P and Moody’s have both suggested that the level of debt at which they would generally downgrade a country’s debt is around 100%. The US is still at roughly 63%, although projected to rise. While the US and the dollar have much to lose as the global reserve currency, the dollar’s unique status also facilitates the US government’s ability to issue debt. On the other side of the equation, investors are much more sensitive to the credit risks of sovereign debt than before the financial crisis; the events continuing to unfold among the peripheral countries
                        of Europe continue to rattle markets. Against this backdrop, the US dollar did come under slight pressure after S&P’s warning. We expect that fiscal concerns will continue to drive markets but, as outlined in The Decade Ahead report, we do not think this news suggests the end of the US dollar as the reserve currency.
                        Facts do not cease to exist because they are ignored. -- Aldous Huxley
                        Two things are infinite: the universe and human stupidity. -- Albert Einstein

                        Comment

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