Standard And Poor’s Rating
August 6, 2011 by USA Post
Standard And Poor’s Rating, A day after Standard & Poor’s downgraded the credit rating of U.S. AA + from AAA’s senior, had more questions than answers about the effects of Saturday’s action will have on the economy and American consumers.
The decision by S & P, major credit rating agencies, came days after Congress approved an agreement to deliver and 2.1 billion in savings over the next decade. The agreement follows the debt ceiling heated, discussions in Washington.
“The downgrade reflects our view that the fiscal consolidation plan that Congress and the administration have recently agreed to live up to what, in our opinion, it would be necessary to stabilize the government’s medium-term debt dynamics,” S & P said Friday shortly after the markets closed.
Although it is unclear what the short-term impact of the downgrade of credit will be some initial responses are expected on Monday when he opened the stock market.
One area of?? Concern is whether the reduction would protect investors from buying U.S. debt and increased spending in the country to borrow money, thus increasing interest rates for consumers on everything from mortgages to auto loans to student loans.
Only time will tell how we will be affected, “said former U.S. Comptroller General David Walker Anderson Cooper of CNN.” Interest rates affecting the U.S. government ultimately can ripple throughout the economy, which is not good news given our conditions and economic weakness. ”
The rating agencies like S & P, Moody’s and Fitchanlyze risk and provide a debt rating that is supposed to reflect the borrower’s ability to repay their loans.
The safest bets are marked AAA. That’s where U.S. debt has been maintained for years. Moody United States first assigned an AAA rating in 1917.
Fitch and Moody, the other two major credit bureaus classifications maintained the AAA rating of the United States after the debt deal this week, but Moody got his perspective on U.S. debt to “negative.”
A negative outlook indicates the possibility that Moody may downgrade the credit rating of the sovereign country within a year or two.
John Chambers, director of sovereign ratings at S & P, told CNN that the political brinkmanship over the debt ceiling turned out to be a key issue, with “the U.S. government to get to the last day before they had cash management problems. ”
Few independent governments in the budget process in the approval process of the debt as the United States does, he said.
And although the budget agreement finally reached, and provide at least 2.1 trillion in savings over the next decade will not be enough, he said. “It will be difficult to go beyond that – at least in the short term – and it is necessary to go beyond that to reach a point where the debt to GDP ratio will stabilize.”
He asked who was to blame, Chambers said: “This is a problem that has long been in development – more than this government, the previous administration.”
Congress must take some blame, he said. “The first thing I could have done is to have high debt in a timely manner cling to the majority of this debate was avoided to begin with, as he had done 60 or 70 times since 1960 without much debate “.
Chambers added that her agency’s decision is likely to have a lasting impact. “Once you lose your AAA, which usually do not recover,” he said.
He referred to the decision of Congress on the possibility of extending the tax cuts of 2001 and 2003 as a key area. “If you let the period of high-income earners, which could give another 950 billion and” he said.
U.S. Treasury officials receivedanlysis of S & P Friday afternoon and alerted the agency to an error that inflated the U.S. deficit and $ 2 billion, said a government official, who was not authorized to discuss the acquisition.
The agency acknowledged the error but said it was sticking with his decision. The government official called it “a decision of the facts-be-damned … Hisanlysis was far away, but did not move.”
But Chambers defended his agency’s move. “There is a difference,” he said. “This does not change the fact that its debt to GDP, under plausible assumptions, will rise over the next decade.”
Rumors of a possible downgrade came shortly after the Italian Prime Minister Silvio Berlusconi said in Rome that the finance ministers of the Group of Seven industrialized countries can meet “within days” to discuss the world economy, sagging.
G7 members are Britain, Canada, France, Germany, Italy, Japan and the United States.
The announcement came a day when anxiety gripped the financial world. Stock markets around the world saw intense volatility amid fears of a debt crisis growing in Europe and an economic recovery stalled in the United States.
American markets were dramatically up and down a day after its worst day since the 2008 financial crisis.
Values?? Of the stock market fell on Friday across Europe and Asia, where mixed reaction to news of the U.S. credit downgrades.
A scathing editorial in the Chinese Xinhua news agency criticized the United States to live beyond their means.
“China, the largest creditor of the world’s only superpower, has every right now to demand the U.S. to address its debt problems and ensure the structural safety of dollar assets in China,” said the editorial.
“To cure his addiction to debt, the United States has to restore common-sense principle that one must live within its means.”
Other responses were more measured.
“We have toanlyze it. It will take some time,” said Finance Minister Pranab Mukherjee. “(The) situation is serious and there is no increase in the making of the manga reviews.”
In South Korea, which also has a lot of U.S. debt, the Yonhap news agency said officials were closely monitoring the financial performance in the United States.
“The news is bad and Seoul plans to closely monitor how the market reacts,” Yoon Jong-won, head of the office of the ministry of economic policy, said Yonhap.
Concerns about debt issues in Europe appeared to struggle with the optimism that a positive U.S. jobs report said the U.S. economy is not directed toward a new recession -. “Relapse” the dreaded
“The crisis in Europe is fast becoming on par with the 2008 financial crisis,” said David Levy, portfolio manager at Capital Management Kenjol, CNN Money. “The jobs report shows that things are not much worse in the U.S., but the focus is clearly in Europe at this time.”
“We will get through this,” Obama said before the reduction in the Navy Yard in Washington, where he announced an employment program for veterans. “Things will get better. And we’ll get together.”
Obama, who spoke Friday afternoon with Sarkozy and German Chancellor Angela Merkel on the crisis, said that July was the 17th consecutive month of growth in private sector employment in the United States, but said much work remains to be done.
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