S&P Downgrades U.S. Credit Rating for First Time
August 6th, 2011Warning: This is not a recommendation to buy, sell or hold any financial instrument.
Remember those Wait For The Weekends To Do It days from 2008? *chortle*
I’m not sure how this is going to go. On the one hand, only a fall down dipshit believes that the U.S. actually deserves a AAA rating, or even the new AA+ rating. The U.S. had already been downgraded by other American and foreign ratings organizations. So, to some extent, maybe the effects of this are “baked into the cake” already.
On the other hand, raising money should become more expensive for the U.S. as a result of this. Since the U.S. has so much debt, this might represent a sort of wildcard, de-stabalizing event.
What do you think?
Loading ...In any event, the thing to watch, going into Monday, will be FOREX. The logical, by the book, reaction to this should mean a lower dollar. Everyone reading this should know about the 70.792 level on the U.S. Dollar Index. If the dollar tanks, we will be watching to see if 72.696 holds; this is the short term support. If it doesn’t, that sets up a try for 70.792.
Via: Washington Post:
Standard & Poor’s announced Friday night that it has downgraded the United States credit rating for the first time, dealing a huge symbolic blow to the world’s economic superpower in what was a sharply worded critique of the American political system.
Lowering the nation’s rating one-notch below AAA, the credit rating company said “political brinkmanship” in the debate over the debt had made the U.S. government’s ability to manage its finances “less stable, less effective and less predictable.” It said the bi-partisan agreement reached this week to find $2.1 trillion in budget savings “fell short” of what was necessary to tame the nation’s debt over time and predicted that leaders would have no luck achieving more savings later on.
What happens when your Credit Score goes down? Your interest rates go up.
What it means: Mandatory cuts to Entitlements & Defense (less ‘principle’ to monkey around with) as Interest payments go up.
This’d be a good time to go to Japan as the yen follows the dollar index. Just take a geiger counter with you…
-Drunky
Fluck. I wrote a long comment and then went offsite for a link and lost it all. BLEAH!
Anyway, I used to be very bearish on the dollar and had lots of Mom’s cash in Merck Fund.
http://www.google.com/finance?client=ob&q=MERKX#
Excellent site to watch if you are bearish on the dollar as Merkx goes up when the dollar is down.
I also played with the currency exchange for awhile.
@Drunky – someone in Japan has a brain and the yen is so down right now. The carry trade has ruined Iceland so someone in Japan (other than TEPCO) has half a brain and has sent the yen into the toilet. Thank you, (says Japan to those with excess cash) we don’t need your vomit here.
This fiat money syndrome is a catastrophe. Benfluck Bernacke ought to get off whatever drug he is on and drive the value of the dollar down, WAY down right now. We need investors in the dollar carry trade like we need another WAR. The banks and big fast money makers also need to be uh, stopped in their tracks. Greed is NOT a good thing. We’re on life support here in the US so just back off.
“…What it means: Mandatory cuts to Entitlements & Defense (less ‘principle’ to monkey around with) as Interest payments go up…”
@ Drunken Economist
You really ARE well lubricated, my friend. We need look no further for evidence than those two paradoxical words in the above statement:
“defense cuts”
You were a couple highballs deeper than usual when you posted that one, right? =)
In a proto-fascist military narco-state like the USSA, EVERYTHING else will be cut first.
Postal service? Who needs it. Everybody can use private carriers. Major facilities? Bechtel & Halliburton will get those at fire sale prices. Social services? Will become decidedly anti-social. And exactly whose definition of “social” will we be using?
But the Pentagon and the IRS will receive maximum funding until they no longer physically exist…
…and let us not forget the official black budget only just barely acknowledged in thje public arena, or the unofficial one churning through additional gazillions at the fringes.
My simplified theory looks like this:
Before they can justify/rationalize a “Globo” currency, in whatever form it appears (IMF certificates, et al.), they need to further destabilize the central pillar reprsenting the lingering remains of the Bretton Woods system.
Change is clearly afoot at the Circle A.
This will be downplayed by the MSM since the ratings agencies made themselves irrelevant during the financial crisis. In this case, I must agree with the MSM. After all, my 80 yr old Mother saw the bubble collapse, but none of the ratings agency clowns saw it. It’s just another act in the theatrical production. I still think the US will face a Soviet style breakup. It’s only a matter of very little time.
Again, I’m not disagreeing with you guys, my point is whatever you’re seeing in the private sector (contraction of credit) is just going to come home to roost in the government. Either it HAS to, or the US Gov’t is going to do something desperate… from the rumblings I’m hearing this morning some in DC are encouraging us to ‘help Mexico’… and ourselves to their oil.
@Miraculix is, I think sadly correct. I think we’ll hear talk of the ‘Amero’ again, or SDRs, ‘bundles of currency’ like credit default swaps for becoming-foetid fiat paper like the dollar.
@eileen: “This fiat money syndrome is a catastrophe. Benfluck Bernacke ought to get off whatever drug he is on and drive the value of the dollar down, WAY down right now. ”
Um, that’s what Benny boy has been doing. His gamble of trying to beat the Chinese at their own game BACKFIRED. Of course the Fed is totally independent of the US Gov’t. Did you think their name was ‘US Treasury?’ Bueller?
That’s WHY you have Endaka 2.0 (‘high yen v dollar) with the yen having 40% appreciation against the dollar over the last year. Only that ‘Tepco thing’ keeps the Japanese from coming BACK to the United States and snarfing up beachfront properties in California, etc. The Japanese are mostly sticking to their own country to rebuild.
My spies in Japan tell me the yen (which, historically went from $1 = 360en -> 110en ->78en now) is so expensive for tourists that there ARE NO TOURISTS in Japan now. With a nightly stay at a flophouse on the outskirts of Tokyo being about US$100 a night at the current exchange rate, I believe it.
@jburke I was looking at the after hours tickers for some companies and it MAY just be me, but I noticed that Halliburton and some other companies that depend on the gov’t teat seemed to be taking a dive. Tech companies and others ‘independent’ of gov’t contracts… not so much, or gaining.
-Drunky
@Drunk
I noticed that trend as well. I only buy overseas stocks independent of any gov’t operations. 2 of my three current holdings went up nicely on Friday. The third is just sitting like a lump. It’s a company trying to build up a market in India, but I think they are finding out how difficult it can be to get through the red tape there.
I wouldn’t shed any tears if Haliburton went to 0 value.