In a document provided to Treasury on Friday afternoon, Standard and Poor’s (S&P) presented a judgment about the credit rating of the U.S. that was based on a $2 trillion mistake. After Treasury pointed out this error – a basic math error of significant consequence – S&P still chose to proceed with their flawed judgment by simply changing their principal rationale for their credit rating decision from an economic one to a political one.Bottom line, these Treasury/OMB documents are so obfuscationary that even the S&P barely knows what they mean.
S&P has said their decision to downgrade the U.S. was based in part on the fact that the Budget Control Act, which will reduce projected deficits by more than $2 trillion over the next 10 years, fell short of their $4 trillion expectation for deficit reduction. Clearly, in that context, S&P considers a $2 trillion change to projected deficits to be very significant. Yet, although S&P's math error understated the deficit reduction in the Budget Control Act by $2 trillion, they found this same sum insignificant in this instance.
In fact, S&P’s $2 trillion mistake led to a very misleading picture of debt sustainability – the foundation for their initial judgment. This mistake undermined the economic justification for S&P’s credit rating decision. Yet after acknowledging their mistake, S&P simply removed a prominent discussion of the economic justification from their document.
I once attended a conference of global auditors who admitted to me that all government accounting across the world is of extremely poor quality, that there isn't a major accounting firm anywhere that would sign off on any of government financial statements. Case in point, the Federal Reserve doesn't even issue a traditional balance statement. The closest thing the Fed puts out is a statement called Factors Affecting Reserve Balances.
I'm no professional bond rater, but if someone told me they would default unless they could borrow more money I wouldn't rate them triple A
ReplyDeleteThese "people" run a global counterfeit racket protected by USA Armies, Nuclear bombs, Fighter jets, Spy satellites, Unmanned drones, Jails, Concentration camps, etc. The US Dollar is the main global junk they refer to as "money" (World Reserve Currency, they call it) so there is NO WAY this system CAN'T be AAA rated.
ReplyDeleteThis entire staged event is to enslave you further. I bet you all realize that though.
Anon 7:10:
ReplyDeleteYep.
When that bastard Cheney said "deficits don't matter" I immediately thought "Nuclear Blackmail".
It is incredibly laughable that the CBO assumes a constant GDP growth rate of 5% through 2021, when the last time the US had GDP growth of 5% or greater for at least 4 straight quarters was 1984.
ReplyDeleteGiven Treasuries love of accounting tricks and fudging the number I'd be surpassed if they hadn't made a mistake. I mean whats a couple of trillion when the government is involved.
ReplyDeleteBut the downgrade is correct given the attempts by the government to supress the extent of the damage.
wenzel wrote: "there isn't a major accounting firm anywhere that would sign off on any of government financial statements."
ReplyDeletegawd, you can be sooo dramatic with your journalistic juxtapositions in order to embellish your point.
Like the big accounting firms have any integrity. I've said it a million times. They, and the ratings agencies, were the foundation allowing the fraud of the mortgage and banking scandal to occur.
Enron, Tyco, Shearson, Bear Sterns; you know, someone was giving them a clean audit opinion. Audit firms are whores that will give a clean opinion on damn near anything for an audit fee.
And Fas 157? Please.