S&P downgrades U.S. credit rating from AAA to AA+

China Blasts US Debt Problems, Urges New Reserve Currency
Published: Saturday, 6 Aug 2011 | 2:47 AM ET

China roundly condemned the United States for its "debt addiction" and "short sighted" political wrangling and said the world needed a new stable global reserve currency.

In a harshly-worded commentary by the official Xinhua news agency on Saturday, China gave its first official comments on the United States losing its gilded AAA long-term credit rating from Standard & Poor's.

"China, the largest creditor of the world's sole superpower, has every right now to demand the United States address its structural debt problems and ensure the safety of China's dollar assets," Xinhua said.

China also urged the United States to apply "common sense" to "cure its addiction to debts" by cutting military and social welfare expenditure.

"The U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone," Xinhua wrote.

http://www.cnbc.com/id/44043828

Very strong words from China, it looks like the cat is surely out of the bag now.
 
"International supervision over the issue of U.S. dollars should be introduced and a new, stable and secured global reserve currency may also be an option to avert a catastrophe caused by any single country," Xinhua said.

War soon? whos placing bets?
 
Nukz said:
"International supervision over the issue of U.S. dollars should be introduced and a new, stable and secured global reserve currency may also be an option to avert a catastrophe caused by any single country," Xinhua said.

War soon? whos placing bets?
Click to expand...
5h!+ dem fighting words
 
Nukz said:
War soon? whos placing bets?
Click to expand...

That's the last thing China wants. They'd loose all their USD holdings if that happened.

Just a not-so-subtle reminder that China owns America now. They don't need to pwn them as well.
 
Big A.D. said:
Nukz said:
War soon? whos placing bets?
Click to expand...

That's the last thing China wants. They'd loose all their USD holdings if that happened.

Just a not-so-subtle reminder that China owns America now. They don't need to pwn them as well.
Click to expand...

According to Wikipedia at least 60% of China's 3 trillion reserves are in USD. Would they be willing to take a hair-cut on that figure as i'm sure they know through dollar devaluation they will end up being payed in money that may not be worth as much as it was on the day of inception.

That said, China may have significantly more than it's stated as the government is extremely secretive. Wiki suggests China's reserves do not include that of Hong Kong and Macau and China also manages 400-500 billion off the books.

http://en.wikipedia.org/wiki/Foreign_exchange_reserves_of_the_People's_Republic_of_China
 
jungfraujock said:
Nukz said:
"International supervision over the issue of U.S. dollars should be introduced and a new, stable and secured global reserve currency may also be an option to avert a catastrophe caused by any single country," Xinhua said.

War soon? whos placing bets?
Click to expand...

Israel v Syria

Israel 1
Syria 0

Nukz will always beat gun powder.

Sorry

JUNG :(
Click to expand...

Israel V Iran> 1-x Nobody wins , like in Libya, just oil skyrocket and kill everything what survived QE3.
 
not sure if it has been posted here yet but, Tim Geithner (Treasury Secretary) in an April interview;

Peter Barnes "Is there a risk that the United States could lose its AAA credit rating? Yes or no?"


Geithner's response: "No risk of that."


"No risk?" Barnes asked.


"No risk," Geithner said.
Click to expand...

From ZH:
http://www.zerohedge.com/news/and-j...ould-lose-its-aaa-rating-tim-geithner-no-risk

The arrogance with which he answered that question in the video is simply astounding. The whole video is sickening really. How can anyone trust these guys at all?
 
[youtube]http://www.youtube.com/watch?v=SgNLTb58K_Y[/youtube]
 
Bloomberg said:
Fellow rating agencies Moody's and Fitch Ratings have not been as critical as S&P about U.S. finances, as both have affirmed their triple-A ratings. (Moody's has warned that it may downgrade the U.S. in the future.)

Investors that are required by their mandates to invest only in triple-A-rated debt may still be able to own Treasury bonds if only one firm lowers its U.S. debt rating.
Click to expand...

Also the US Treasury is now coercing S&P to revise their downgrade according to an unidentified source, reported on Bloomberg, linked to CNN which just links back to Bloomberg. Sounds pretty dodgy.

http://www.bloomberg.com/news/2011-...owngrade-unidentified-official-tells-cnn.html

So while there isn't strictly a legal mandate for a massive sell-off on monday i think the writing is pretty clearly on the wall to even the most brain washed observers.
 
This was from Armstrong on the 1st prior to the downgrade.

Will a Downgrade of USA FROM AAA Really Mean Anything?

The hype about Standard & Poor going to downgrade USA credit rating is just not important. Oh the
talking heads will cry the sky is falling. They downgraded Japan in 2002 and nothing took place. Not even
their rates increased. The same is likely in the USA and quite frankly, if S&P really thinks they have that
much power, they should stop drinking their own bath water.

Downgrades come AFTER the market has already shown its course of action. It is not like the rating
agencies actually pontificate and then the markets wake up and say: Oh my God! Ratings follow the
market activity and have no power otherwise. The credit rating they gave the CDOs did not convince
people to buy them. Once the junk was rated AAA, they were good collateral for the REPO market. That
was the key. They rated the junk AAA and that made it good collateral and that was the ONLY reason
the stuff sold. Without that rating, the NY boys couldn't sell anything.

When it comes to sovereign debt of the USA, we are talking about the US$ is the RESERVE currency.
About two-thirds of central bank reserves globally is in dollars and the way those dollars are held is in
government treasuries. Does anyone really think that if S&P downgrades the USA that its debt will not
be sold?

When you deal in REAL money, there is a problem. How do you store it? You can't just put a billion on
deposit at a bank. They will sell it every night and don't have to tell you. If the REPO market blows up
and you go to the bank and say I want my billion, they lost it, and so you turn to FDIC to collect your
$100,000. Right! The ONLY way to park serious money is in treasuries. If you have hundreds of billions,
now you have the added problem of MARKET SIZE. You can't just go to any country. Their debt structure
cannot provide the ability to park serious money. This is the difference from taking personal economics
and applying it to the whole world. It doesn't work! Don't worry. Be happy! Until we revise the world
monetary system and the dollar is no longer the RESERVE currency, sorry boys, but you are spinning
scenarios that scare people, sound good as talking points, but are just gibberish in the real world of
serious money. Rates will rise because capital will shift out of bonds into assets not because of the S&P.
Click to expand...

http://armstrongeconomics.com/martin_armstrong_writings/
 
Blockhead said:
Also the US Treasury is now coercing S&P to revise their downgrade according to an unidentified source, reported on Bloomberg, linked to CNN which just links back to Bloomberg. Sounds pretty dodgy.
Click to expand...

Maybe they learned their lesson from five years ago about giving AAA ratings to crap paper issued by fools...

Of course the U.S. government is, like, totally different to those CDOs though. Completely different. :cool:
 
Computer programs cannot assess creditworthiness. They can, however, tell the difference between AAA and AA+ - or any other rating which has been programmed into them. And that is where the ratings agencies come in.
 
S&P Analysis Was Flawed by $2 Trillion Error, Treasury Says

Aug. 6 (Bloomberg) -- Standard & Poor's decision to downgrade the U.S. credit rating was flawed by a $2 trillion error, according to a Treasury Department spokesman.

S&P lowered the nation's AAA grade one level to AA+ yesterday, after warning on July 14 that it would reduce the ranking in the absence of a "credible" plan to lower deficits even if the nation's $14.3 trillion debt limit were lifted. The outlook was kept as "negative."

The Treasury disagreed with S&P's assessment because the analysis was carried out hastily, said a person familiar with the matter who declined to be identified because the discussions were private. The ratings firm erred in estimating discretionary spending levels at $2 trillion higher than Congressional Budget Office estimates, the person said.

S&P, in a statement, disputed the Treasury's assertions and said using the department's approach to the CBO figures didn't affect the ratings decision. The Treasury's $2 trillion figure was derived by calculating government debt over a 10-year period, S&P said.

"Our ratings are determined primarily using a 3-5 year time horizon," S&P said in the statement. When projecting government debt through 2015, the discrepancy between the Treasury's approach and S&P's approach to the CBO figures amounts to $345 billion, the ratings firm said.

"The primary focus remained on the current level of debt, the trajectory of debt as a share of the economy, and the lack of apparent willingness of elected officials as a group to deal with the U.S. medium term fiscal outlook," the firm said. "None of these key factors was meaningfully affected by the assumption revisions to the assumed growth of discretionary outlays and thus had no impact on the rating decision."

Moody's, Fitch

The S&P decision went further than Moody's Investors Service and Fitch Ratings, which affirmed their AAA credit ratings for the U.S. on Aug. 2, the day President Barack Obama signed a bill that ended the debt-ceiling impasse that pushed the country to the edge of default. Moody's and Fitch both said that downgrades were possible if lawmakers fail to enact debt reduction measures and the economy weakens.

Steven Hess, a senior credit officer at Moody's in New York, said at the time that while the compromise between Obama and members of Congress was "a positive step" toward reducing the deficit, "we do think more needs to be done."

S&P, in its earlier statement explaining the downgrade, said that the deficit-cutting plan signed by Obama after months of wrangling with Congress falls short of what "would be necessary to stabilize the government's medium-term debt dynamics."

U.S. Politics

After being alerted to that, S&P lowered its calculations by $2 trillion and then relied largely on judgments about U.S. politics to support the downgrade, the person said. The Treasury was presented with the S&P analysis shortly before 2 p.m. yesterday.

S&P said in its statement that it may lower the long-term rating to AA within the next two years if spending reductions are lower than agreed to, interest rates rise or "new fiscal pressures" result in higher general government debt.

The wrangling over raising the nation's debt ceiling indicates that "further near term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process," S&P said.

S&P currently gives 18 sovereign entities its top ranking, including Australia, Hong Kong and the Isle of Man, according to a July report. The U.K. which is estimated to have debt-to-GDP this year of 80 percent, 6 percentage points higher than the U.S., also has the top credit grade. In contrast with the U.S., its net public debt is forecast to decline either before or by 2015, S&P said in yesterday's statement.

New Zealand is the only country other than the U.S. that has a AA+ rating from S&P and an Aaa grade from Moody's. Belgium has an equivalent AA+ grade from S&P, Moody's and Fitch.

--With assistance from John Detrixhe in New York and Michael Shanahan in London. Editors: Christopher Scinta, Christopher Wellisz

To contact the reporter on this story: Ian Katz in Washington at [email protected]; Vincent Del Giudice in Washington at [email protected]
 
Send this to Bloomberg to wake them up.

Let see what were the figures that the US Treasury challenged?

The Treasury's figures projected a cumulative increase in government debt of $US 20.1 TRILLION. S&P used their own economic modelling and came up with a figure of $US 22.1 TRILLION.
The US Treasury is projecting average annual increases in US "discretionary spending" of $US 2.01 TRILLION every year for the next ten years. S&P is projecting average annual figures of $US 2.21 TRILLION over the same period.
Leave aside the fact that ten years ago, the US Treasury was projecting the elimination of US funded debt by 2012-13.
 
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