Friday, August 5, 2011

S & P Downgrades Debt of United States Government


Update 1--Standard & Poors has downgraded the debt of the United States government to AA-Plus.

Update2--The bonds now have a lower rating from S&P than bonds issued by countries such as the UK, Germany, France or Canada.

Update3--The outlook on the new U.S. credit rating is negative, S&P said in a statement, a sign that another downgrade is possible in the next 12 to 18 months.

Update4--Ramifications: Any pools of money that  require money managers by bylaws or other agreements to hold only AAA debt may be forced to sell Treasury securities. It is unclear as to the size of such pools, since some may have clauses that require a top rating from one or two of the three major agencies, Moody's. Fitch and S&P.

There are oddities to this downgrade, since the Federal Reserve has stepped in for decades and printed money whenever the Treasury had any difficulty selling debt.

It appears that the real economik result of this downgrade will be that the government will much easier be able to claim that "taxes must be raised," for fear that the debt will be downgraded even further. Thus, this downgrade, especially with a negative outlook plays in to the hands of the tax raisers.


  1. HAHAHAHAHAHA.......

    Monday should be a scream!

  2. Wait. What about Moodys and Fitch? they upheld the AAA rating? How does this impact money managers who are required to hold AAA?
    Can some one explain this?

  3. Rand Paul was intimating a couple of weeks ago that many major investment pools were changing the rules to "AAA *OR* government securities." I wonder how many of them beat this announcement.

  4. As you might expect, this whole thing smells fishy. Wenzel, you posted the video where Rand Paul mentioned that various institutions have recently been changing their by-laws to allow them to hold non-AAA govt debt.

    No doubt S&P gave the administration a heads up about the downgrade, but the insiders must have known for a while that this was coming. In the last few weeks I even came across several MSM "analysis"-type articles where they mentioned the USA would probably be downgraded sometime in the future. They must have been prepping us for what they already knew would come.

    Also, it now makes me wonder if that 500 point drop yesterday was the result of insiders unloading just ahead of the downgrade. Monday will be interesting indeed.

  5. Can you imagine how it must suck to be a quant for a large fund right now. Here you were ready for a nice weekend of rest and relaxation after a horrific week and then this happens? No doubt S&P timed this perfectly but you have to imagine that even after 36hrs of quite work, few quants will have any clue on where things will go when Asian markets open on Monday. Pure logic would dictate that Treasury's should sell off, but I have to beleive that many will ignore sell requirements as a result of the downgrade.

    My feeling is that gold is going to shoot past $1700 and equities are going to sell off hard. Treasuries will take a hit but I don't think its going to be all that much. The dollar will probably strengthen (making QE3 easier to justify) as everyone sits on their hands trying to find protection. My guess is that anything linked to Treasuries, which is like just about every kind of private and public debt out there, will definitely take a hit.

    Should be interesting

  6. Hopefully Matt Damon will be making a statement soon to help us understand this better.

  7. S&P is a joke.

    Portugal is still AAA but U.S.A is AA+?

    They missed the boat back in one should take them seriously.

  8. Oh Come On!!! An agency that uses guns and counterfeit "money" that cost nothing to create an unlimited amount? That terrorist gang will ALWAYS have a AAA rating!

    How can it not?

    This is just more Establishment manipulation designed to scare us into a national VAT tax and $3 / gallon gas tax...So we can be more like The Borg of Europe.

  9. I will reserve my opinion on this until Matt Damon tells me what to think.

  10. @Chris K ... S&P rates Portugal as BBB-

  11. @ danger

    Thx. I thought that didn't sound right. Better check my sources next time.

  12. Barry has been one of the most successful presidents. We are getting the change he promised. You have to know that a downgrade on his birthday was icing on his cake.