[paraclete]

Once we were concerned about the PIIGS as Portugal, Ireland, Iceland, Greece and Spain battled to stay afloat and were bailed out one by one but now as well as the PIGS we have a new animal in the failing economy stakes the US has received an unfavourable rating. One would say they are too big to fail but there have to be some deep pockets to bail the US out of its appitite for debt. Will the US have to yield to the same austerity measures as have befallen the European states and begin to cut back its welfare spending and start to have a realistic taxation regime. Will it bite the bullet and cut into the extraodinary level of military spending. I expect there will be no more PIIGUS in spaceWall Street plunges on US debt fears

[tomder55]

The clueless Obots weighed in yesterday and said that S&P rating was 'politically motivated' .

What did they expect ? They think budget cuts are slight reductions in the rate of spending increases.

[paraclete]

An S&P rating isn't politically motivated it actually works on how many times the interest bill is covered so you can't borrow more and reduce taxes and expect your rating not to suffer. What it also means is that if the Fed won't bring interest rates back to realistic levels in the US, the market mechanism, which everybody loves, will eventually kick in and do it for them.

The nasty part of this is that it isn't only the US who is affected, the rest of us will be dragged down with them

[tomder55]

The reason they think it is politically motivated is because one of the factors in S&P's evalutation was the President's address last week .S&P made it clear that a major part of their analysis is the complete lack of seriousness the
President showed regarding deficit reduction.

The outlook reflects our view of the increased risk that the political negotiations over when and how to address both the medium- and long-term challenges will persist until at least after the national elections in 2012
Some compromise that achieves agreement on a comprehensive budgetary consolidation program--containing deficit reduction measures in amounts near those recently proposed, and combined with meaningful steps toward implementation by 2013--is our baseline assumption and could lead us to revise the outlook back to stable. Alternatively, the lack of such an agreement or a significant further fiscal deterioration for any reason could lead us to lower the rating.

S&P Text: Outlook On U.S Ratings Revised To Negative -2 | iMarketNews.com

S&P is only telling Washington what the Tea Party has been saying for over a year.

You are right,if the rating lowers then investors will demand better interest rates . I'm surprised they aren't anyway . They know the Obots are panicking over the possibility that the Republican House may balk on raising the debt limit they need so the government can beg investors to purchase more US IOU's.

They see the Ryan plan ,which proposes to take 25 years to balance the budget being mocked by the President as being a plan that destroys the fabric of our society... and the Obots wonder why S&P doesn't take them seriously.

[paraclete]

Yes S&P take advice on future direction when considering ratings so obviously whatever BO said is taken into account and obviously S&P don't want more junk bonds to rate so they will be cautious. Look, we all know the US is bankrupt but no one is going to shout it, they will just take their time rachetting up the preasure one notch at a time. That way they can say we warned you and we gave you time to respond.

I have to laugh; 25 years to balance the budget and over here we have a Treasurer set on doing it in two no matter what pain he inflicts and that from what you might call a "liberal" government. Perhaps we should export him to the US to show you how it is done

[tomder55]

It won't be long before other rating firms like Moodys follows suit.

Here is the text of the President's speech .
http://www.nytimes.com/2011/04/14/us...bama-text.html

This from the guy who proposed a budget with a deficit of $1.6 trillion , 3x the largest one President Bush ever had.
White House Expects Federal Deficit to Spike to $1.65 Trillion - WSJ.com

Bush's last deficit was $458.6 Billion

[paraclete]

Tom why do you send me rhetoric to read?

Reflecting on it I see the difference between your system and mine

We have an executive who says to the legislature you have considered this and this is what you want to do, OK. Whereas you have an executive who says this is what I want to do and your legislature says this is the way you will do it. The difference lies in what we call consensus which I see as lacking in the BO approach.

I think your public expenditure suffers from the same problems as our social welfare system, no social welfare appropriation is ever repealed but in our case there are some very big changes in the way it is implemented

[tomder55]

no social welfare appropriation is ever repealed

Exactly... we end up calling them 'entitlements' ,and even speaking seriously of reform is a political death sentence.

[tomder55]

Meanwhile ;a glimpse into our future can be found in the 'G' part of PIGUS .
To attract investors their bonds are now paying 21.37% ,and that still doesn't guarantee they won't default.
FT.com / Capital Markets - No relief for soaring Greek borrowing costs

Strategists predict yields will continue to climb as the average price of Greek bonds remains at about 70 per cent of par. Most strategists expect a haircut of at least 50 per cent in the event of a restructuring – meaning prices would have to fall to 50 per cent of par before a default was fully priced in.

To date ,the US Treasury has been largely immune from "haircuts " . But if ratings agencies like S&P act on their warning the US could see similar rate climbs.

I started as a young adult in the late 1970s . Unemployment ,inflation ,energy crisis ,a flat economy ,and high interest rates were the norm. I never thought I'd see those days again.

[paraclete]

We have all been through the high interest rates Tom I had a house loan at 18% at one stage in the 80's countesy of the international market. I cannot see the US getting as bad as the tiny states of Europe but it needs to take the warning seriously because what that poor S&P rating does is jack up the cost of funds to government making the deficit worse

[tomder55]

Now we find out that the President knew S&P was going to make it's downgrading statememt and the President tried to pressure them out of it.
http://www.washingtonpost.com/busine...O8D_story.html

[paraclete]

now we find out that the President knew S&P was going to make it's downgrading statememt and the President tried to pressure them out of it.
Obama administration officials tried to keep S&P rating at ‘stable’ - The Washington Post

Well of course, what use is the Presidency if you can't use a little muscle. Perhaps BO doesn't know what independent means

[paraclete]

Have you noticed; unemployment 29% in Spain, does this mean all the Africans have gone home or are they counted in the statistics?

The US could solve all its unemployment problems by sending all the hispanics home

[paraclete]

Well now we start round 2, it started with Greece the G in PIGUS and now we are back to Greece which has suffered a further down grading in its credit rating and needing a new bailout to meet its obligations, the dominoes are starting to fall, Europe, which means Germany and France either coff up or abandon the EU. The UK is on the ropes, Iceland has already defaulted, but two pennith of nothing is nothing, Ireland has little hope and Spain is nowhere to be seen, and the US not very healthy either.


The lesson is here, this is what you get when you overextend yourself and pay yourself more than you are worth, so time for some austerity, which means more tax and less expenditure

[tomder55]

The lesson is here, this is what you get when you overextend yourself and pay yourself more than you are worth, so time for some austerity, which means more tax and less expenditure

Been having the same issues here ;and as you see in Wisconsin ,and the debates over the US budget ;we have the same intractability .

[paraclete]

we have the same intractability .

So you are saying unemployment is rising and the dollar is failing and america can't meet its debts? Better cut back on some adventurist wars and bring the boys home. We have just had a nice budget delivered which will bring us into surplus within two years, or so the story goes, no intractability here, just lack of traction. It's what can be done when the military doesn't control your thinking

[tomder55]

better cut back on some adventurist wars and bring the boys home.

Wouldn't make a dent in the imbalance. But talk entitlement reform ,where the real problem is ;and you sign your political death warrant . It will take a crisis like Greece for the US to get our collective heads out of our arses.

[paraclete]

Wouldn't make a dent in the imbalance. But talk entitlement reform ,where the real problem is ;and you sign your political death warrent . It will take a crisis like Greece for the US to get our collective heads out of our arses.

Well Tom I'm glad it is you who said that about the people of america

But you see Tom what is impossible in one place is possible in another
Federal Budget 2011 | Wayne Swan Now that should give you hope, if a socialist, the term liberal means something different here, government can do this sort of thing

[tomder55]

Yeah I get it ;you've already been to the mountain top and have seen the land of milk and honey. Eventually the nanny state falls under the weight of it's obligations unless it does some serious reneging of it's promises .

[paraclete]

yeah I get it ;you've already been to the mountain top and have seen the land of milk and honey.

No you haven't really got it. I have crossed over the Jordan and live in the land of milk and honey and guess what? We have discovered there are no giants in the land, they were just an illusion put up by conservatives who wanted to keep us out and keep all the money for themselves.