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petegz28
07-25-2011, 11:01 PM
Where were the credit rating agencies during the 2007-2008 financial crisis when they rated subprime CDO’s triple A?

After the downgrading won’t the banks just get more in interest buying T-Bills? This is just a banking ploy similar to the financial coup d’état by Hank Paulson and George Bush in 2008 (right before the election). Obama and company have to have this scare heading into a National Election (terror tactics and politics as usual). Just another way to unload debt problems onto the American people.

A lot of investors that don’t really trust Wall Street will be happy to get a higher rate of interest on their T-Bill and other secure investments due to a credit rating score. While no country (the US should be junk bond status–asset inflation issue–along with all other countries) deserves a triple A debt rating what can China and company do–stop lending us money at a higher rate of interest? Perhaps China and Oil Rich Country officials have been talking to Moody’s along with the Obama’s Revolving Door Bankers? Just keep in mind that the Federal Reserve Bank can print its way out of any debt crisis. Don’t you wish you could legally counterfeit money? Also, the dollar is the world’s reserve currency so we are hardly in the position of other debt strapped countries. The US economy can’t be compared to a corporate business so stop putting them in the same category (supposing this will force us into bankruptcy).

What should we do with Moody and their rating threats? Close them down while investigating their 2007-2008 bank debacle. Why would we let such an incompetent rating agency lower or credit rating?

http://bodybydesign.wordpress.com/2011/07/23/moody%E2%80%99s-debt-terror-scare/

FD
07-25-2011, 11:08 PM
Interest rates would increase following a downgrade in the credit rating. You think this would be good for the economy, correct?

BucEyedPea
07-25-2011, 11:11 PM
terrorists

petegz28
07-25-2011, 11:12 PM
Interest rates would increase following a downgrade in the credit rating. You think this would be good for the economy, correct?

In the long run, yes. These artificially low rates are a financial cancer. Low rates are not the silver bullet we are told they are. We need some serious reforms when it comes to regulations and our business environment.


How did we ever grow as a country when rates were 10 x higher than they are now?

FD
07-25-2011, 11:13 PM
In the long run, yes. These artificially low rates are a financial cancer. Low rates are not the silver bullet we are told they are. We need some serious reforms when it comes to regulations and our business environment.


How did we ever grow as a country when rates were 10 x higher than they are now?

OK so you should be cheering on a failure of negotiations that results in us losing our AAA rating. It being such a boon to the economy and all.

petegz28
07-25-2011, 11:16 PM
OK so you should be cheering on a failure of negotiations that results in us losing our AAA rating. It being such a boon to the economy and all.

How can a AAA rating be justified when a country is on the brink of default in the first place? Greece has yet to default yet they have been cut to 1 step above.

Again, as I have said and the OP states, these are the same rating agencies that stamped all the CDO's AAA. Their AAA rating is a falacy to begin with.

FD
07-25-2011, 11:17 PM
How can a AAA rating be justified when a country is on the brink of default in the first place? Greece has yet to default yet they have been cut to 1 step above.

Again, as I have said and the OP states, these are the same rating agencies that stamped all the CDO's AAA. Their AAA rating is a falacy to begin with.

So you do favor a credit downgrade, and think it would improve the economy?

petegz28
07-25-2011, 11:19 PM
So you do favor a credit downgrade, and think it would improve the economy?

Do I favor one? Not particularly. Is it or should I say should it happen regardless? Yes. You can't keep sucking up all this debt and pretend everything is ok. We got where we are by trying to add debt on top of debt to make debt go away. It's finally catching up with us.

BucEyedPea
07-25-2011, 11:19 PM
So you do favor a credit downgrade, and think it would improve the economy?

We will come out of it just like others who've had their lowered. BTW the govt is NOT the economy.

FD
07-25-2011, 11:20 PM
Do I favor one? Not particularly. Is it or should I say should it happen regardless? Yes. You can't keep sucking up all this debt and pretend everything is ok. We got where we are by trying to add debt on top of debt to make debt go away. It's finally catching up with us.

Why don't you favor one, if it would help the economy?

petegz28
07-25-2011, 11:22 PM
Why don't you favor one, if it would help the economy?

It would in the long run because it would force us to get our financial house in order. I don't want to go through the pain any more than the next person. But I also believe that we can't keep kicking the can down the road in the hopes that Congress will one day do something about the situation.

FD
07-25-2011, 11:23 PM
It would in the long run because it would force us to get our financial house in order. I don't want to go through the pain any more than the next person. But I also believe that we can't keep kicking the can down the road in the hopes that Congress will one day do something about the situation.

Would an increase in interest rates help or hurt the economy in the short term?

petegz28
07-25-2011, 11:25 PM
Would an increase in interest rates help or hurt the economy in the short term?

That would depend on how much they rose. I think there are benefits to rates going up some that would offset some of the pain we would feel in other areas.

petegz28
07-25-2011, 11:28 PM
K, I am out for the evening. We can pick this up tomorrow.

FD
07-25-2011, 11:29 PM
That would depend on how much they rose. I think there are benefits to rates going up some that would offset some of the pain we would feel in other areas.

OK, but if they went up a 1 or 2% that would be good, right? Sounds like a credit downgrade would be pretty helpful to the economy under your economic theories. Whats strange is it doesn't seem like many other people see it that way.

RINGLEADER
07-26-2011, 12:20 AM
So you do favor a credit downgrade, and think it would improve the economy?

Without a plan to really curtail deficit spending the ratings will get cut - even if a 'kick-the-can' resolution is found. It's not the absence of a deal that will lead to the downgrade, it's the absence of a deal that actually addresses the underlying problems that rating agencies are tasked to monitor.

And the earlier respondent is correct that artificially low interest rates aren't sustainable. The only difference between increasing rates as was done in the Carter years is that now our debt is so large that an increase in future spending would be (already is) impossible to absorb. That's why Obama's continued references to debt as a portion of GDP ring so false - the level of debt service and the amount of growth needed to maintain the benchmarks that Obama is targeting aren't being met and anything that increases those targets is likely to make them (even more) unattainable.

But don't have any illusions about the debt ceiling or credit downgrades coming or get confused by Obama's attempts to paint this mess as something he inherited. He quadrupled the deficit and set up on a path of trillion dollar shortfalls for as far as the eye can see. This was his solution to fix the economy and it failed and until the House went to the GOP the Congress were willing accomplices to his thievery. That's what makes the Dem talking points warning the GOP that if they "break it they own it" so laughable. This system is already broken. Obama's solution is to raise taxes because it is the "fair" thing to do. Reid's plan is filled with gimmicks but does concede on a lot of the big points that the GOP wanted (albeit with a woeful lack of specificity in the cutting arena), and the GOP solution is to cut our way out of the deficit. Their current plans are laughably inadequate unfortunately.

petegz28
07-26-2011, 07:11 AM
OK, but if they went up a 1 or 2% that would be good, right? Sounds like a credit downgrade would be pretty helpful to the economy under your economic theories. Whats strange is it doesn't seem like many other people see it that way.

I don't think 1-2% will be as bad as many think so. It may not bode well for the stock market but it will for Main St. Sure, houses might cost a little more, credit cards etc. But the strength in the $ will offset costs for things like food and energy and materials costs and thus provide a much needed reprieve to Main St.

Now if rates skyrocket then yes that is bad. Unlike you, I believe there has to be a balance. You on the otherhand want the scales tipped all the way in one direction.

Amnorix
07-26-2011, 07:26 AM
How can a AAA rating be justified when a country is on the brink of default in the first place? Greece has yet to default yet they have been cut to 1 step above.

Again, as I have said and the OP states, these are the same rating agencies that stamped all the CDO's AAA. Their AAA rating is a falacy to begin with.

Ratings have to do with the ability to pay. Our inability to pay all of our obligations (debt and other) as of August 2 is entirely self-inflicted.

petegz28
07-26-2011, 08:07 AM
Ratings have to do with the ability to pay. Our inability to pay all of our obligations (debt and other) as of August 2 is entirely self-inflicted.

I know what ratings are "supposed" to be for. Sorry if I don't put a lot of stock in a bunch of defunct morons and Moody's and S&P.

Even if we don't raise the debt ceiling we have the ability to pay. So it's irrelevant anway.

And most people's inability to pay for debt they took on usually is self-inflicted.

RINGLEADER
07-26-2011, 08:16 AM
And most people's inability to pay for debt they took on usually is self-inflicted.

A truth lost on most politicians. Especially those who believe all money belongs to the government.

Amnorix
07-26-2011, 08:30 AM
I know what ratings are "supposed" to be for. Sorry if I don't put a lot of stock in a bunch of defunct morons and Moody's and S&P.

Moody's and S&P obviously dropped the ball very badly in connection with the collapse of the housing debacle. It also doesn't help any that their integrity is compromised by virtue of the fact that the same people whose paper they grade are the ones that pay them. Last, but not least, the ones that are really, really good at this stuff are the ones that stay at the big brokerage houses because that's where you get rich. People don't generally get rich by going to the ratings agencies.


Even if we don't raise the debt ceiling we have the ability to pay. So it's irrelevant anway.

Not sure what you're referring to here. If you mean the 14th amendment workaround that's been bandied about, I'm dubious. If you mean the ability to pay the debt obligations by prioritizing those over the other obligations of the US government, you are of course right in the strictest sense (i.e. that we need not default). The ratings agencies would certainly be well-entitled to downgrade US debt nonetheless, even in absence of default, due to the perceived dysfunctionality of the government, the failure even in the face of stark reality to adopt entitlement reform and/or tax increases, etc.

In other words, a failure to reach a political solution could be interpreted to show that the system is broken and the train has indeed completely left the station.


And most people's inability to pay for debt they took on usually is self-inflicted.

"People" don't have arbitrary self-created "debt-ceilings". We could have done as we have done so many times before and waived a magic wand to lift the debt ceiling ages ago, without controversy. But to their credit the Republicans took a stand and said "we need reform, this can't keep going like this."

But the current situation is entirely self-created beyond just the normal "we outspend our income".

Amnorix
07-26-2011, 08:31 AM
A truth lost on most politicians. Especially those who believe all money belongs to the government.


Way to overstate. Or in the words of BEP, strawman.

petegz28
07-26-2011, 08:32 AM
Moody's and S&P obviously dropped the ball very badly in connection with the collapse of the housing debacle. It also doesn't help any that their integrity is compromised by virtue of the fact that the same people whose paper they grade are the ones that pay them. Last, but not least, the ones that are really, really good at this stuff are the ones that stay at the big brokerage houses because that's where you get rich. People don't generally get rich by going to the ratings agencies.




Not sure what you're referring to here. If you mean the 14th amendment workaround that's been bandied about, I'm dubious. If you mean the ability to pay the debt obligations by prioritizing those over the other obligations of the US government, you are of course right in the strictest sense (i.e. that we need not default). The ratings agencies would certainly be well-entitled to downgrade US debt nonetheless, even in absence of default, due to the perceived dysfunctionality of the government, the failure even in the face of stark reality to adopt entitlement reform and/or tax increases, etc.

In other words, a failure to reach a political solution could be interpreted to show that the system is broken and the train has indeed completely left the station.




"People" don't have arbitrary self-created "debt-ceilings". We could have done as we have done so many times before and waived a magic wand to lift the debt ceiling ages ago, without controversy. But to their credit the Republicans took a stand and said "we need reform, this can't keep going like this."

But the current situation is entirely self-created beyond just the normal "we outspend our income".

How is it beyond us outspending our income? That is exactly why we are where we are.

Amnorix
07-26-2011, 09:20 AM
How is it beyond us outspending our income? That is exactly why we are where we are.


Absent the debt ceiling limit, there's no crisis now, here, today. We're heading down to the road to a crisis, but the current crisis isn't one where we can't meet our obligations. It's an artificially created crisis. Don't get me wrong, I'm HAPPY the artificially created crisis HAS been created, but that doesn't make it less artificial.

I'd much rather an artificial crisis today that leads to serious reform than no crisis today and an actual crisis tomorrow.