Posts
http://finance.yahoo.com/news/SampP-warning-Fix-deficit-or-apf-3906974984.html?x=0&sec=topStories&pos=main&asset=&ccode=
I know its not my week but this is an extremely news worthy article that I don't think we should let go to waste.
Standard & Poor's "lowered its long-term outlook for the federal government's fiscal health from "stable" to "negative," and warned of serious consequences if lawmakers fail to reach a deal to control the massive federal deficit." This could have potentially huge implications on the government as we have talked about, the higher your credit rating the cheaper debt financing is. The U.S is regarded as the most secure.
Yet can we consider the S&P as a credible source, I mean not three years ago they were ranking worthless mortgages as AAA?
Hopefully we can discuss this is class tomorrow as I think it goes along very well with the book.
Subscribe to:
Post Comments (Atom)
I like what you said about S&P's credibility, but apparently there are those that still value them since stocks were down all over the world yesterday. Time for the government to grow up and do the hard work that needs to be done.
ReplyDeleteIt is great to see a push from the private sector, and maybe this will get the wheels spinning in DC.
ReplyDeleteI just wish the government would not need a push. If S&P didn't feel compelled to lower is long-term outlook, the US would be much better off. US companies wouldn't lose value in stock, US citizens wouldn't lose money investments, etc.
Also, check out the "Sovereign Risk" section in Reinhart and Rogoff - pages 232-233.
ReplyDeleteSeems not only pertinent, but also a bit scary.
That is a very good point Chris. Thanks for bringing up this article. We might not be able to trust their ratings as true, however they still hold a certain reputation, and scares/ pushes like this on the government cause the people to panic. Citizens holding bonds will feel the need to rush to the bank to cash in on them before they are no longer worth anything. If this is done on a large enough scale, the treasury will be in even more trouble than they are now.
ReplyDeleteI agree with the comments about the credibility issues the S&P has dealt with in recent times since the financial crisis. Our country owes so much I find it hard to believe we can pay off any debt. I don't like our system of printing more money by the Federal Reserve. There is no gold to back it's worth so we face crises of inflation as well. Our money is just deflated, almost worthless paper. Raising our debt ceiling is just a way of buying us more time, and enables to print out even more money to cover our debts.
ReplyDelete