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Senior Contributor

Reason for downgrade

So many on this site want to make the reason for the down grade of your credit rating  simple thing by 'blaming' one president or another.

Not the reason it happened.

There were a number of things that led to it but the one thing that keeps getting ignored in any discussions here is the bullheaded unwillingness of your politicians to find a compromise to getting the debt ceiling raised in a timely manner. Pushing it up to a last minute deal with threats to let your country default has confirmed that your debt is not secure.

Happened to sit down in front of TV last night and scanned past CNN while they were discussing the downgrade and they were pointing out that fact the same as commentators in Canada have.

Now blame the politicians who would not find a deal sooner.

The ones who will not cut some spending and find more resources to cover the spending you have already racked up over the last 30+ years.

There is no easy route out of too much debt.

Canada found that out in the 1990ies when our government tackled our debt.

It takes cuts and more income and even then it takes several years to turn it around.

Unfortunately for us we have a Conservative government again which has cut taxes and put us back into deficits.

Not the way to a rosy future.

21 Replies
Honored Advisor

Re: Reason for downgrade

Hey Canuck, would your banker care about inner squabbles with your Wife as long as you are not behind with payments? Nope, he don`t care as long as your payment is on time and that`s what the debt ceiling deal is the Republicans are the hardworking husband and the Democrats are the high maintainance wife.  The family is doing well making it`s obligations it`s just the wife(Democrats) needed a good spanking for over spending. As a lender I would be relieved all be it late.

Senior Contributor

Re: Reason for downgrade

Everytime I read crap like this I can see why the American farmer has to have constant and continuing taxpayer support to survive.  I willing to bet that 99% of today farmers never ever had to face the startup costs and struggles it took to start a business. 

Senior Contributor

Likely True

Despite what the finger pointers want to say, I believe you are basically correct. What the USA did is prove that we have a broken and seriously flawed political system. Ultra conservatives and those who can still call themselves republicans proved they can hold up important national financial decisions based on principals and tax cuts. Democrats took note and learned that they can also hold up important national financial decisions based on principal as well so they are holding up for social spending and trying to raise tax revenues. It is the ultimate gridlock and proved that our system is broken and somewhat of a risk. Few if any have responded when I pointed out that this congress passed the very budget they threatened not to fund.

 

All that said, S&P's downgrade has to be somehow politically motivated because there is no doubt the US can pay their debts into the reasonable future. What they want, I don't know.

 

Only idiots use pointless stories, parables and anticdotes in response to this issue. These "stories" do not truly express the complexity nor the issues involved. An individual is no more representative of a government's financial credit status than bogfoot is representative of the Oregon legislature. All this finger pointing, use of "stories" just goes to enforce the true problem of our broken political system and ideologies that are not for the people or by the people.

Senior Contributor

Re: Reason for downgrade

Just what are you going to post when we no longer receive payments? Will miss your one topic mind. Farming is one of the most capital intense business there is. Don`t blow your mouth about "start up cost" We have "start up cost" every year! And don`t even get me started on "struggles", After several thousand dollars invested in this years "start up costs" I now have the privilege to watch it wilt in the HOT Sun...............

Veteran Advisor

Re: Reason for downgrade

BA, did you come up with the Republicans as Husbands, trying to face the debts and get a budget that works and keeps the household solvent, and the Democrats as the spendthrift wife on your own, or did some talk show or politician use that analogy? The reason I ask is that I was about to write a post using a similar comparison, and then I just saw yours.

 

Now I am wondering if it is just a case of two great mind thinking alike, or if someone else planted the seed in both of our minds.

 

In any event, I think the shoe fits.

Senior Contributor

Re: Reason for downgrade

How degrading.  I hope your wives go out and blow a bundle on you.  I would if my husband said something like that.  And guess what if the budget around here got out of whack it is usually because he did it  not me.

 

America was downgraded because our government demonstrated without a doubt how broken they are.  And they did it for all the world to watch.  Mostly the workings in Washington are quiet.  Not a lot of noise until things are done.  But no this time they had to put on a spoiled brat display for the entire world to watch.  Like 2 bickering 7 yr olds.

 

No wonder the world is worried about the quality of our government.  Not our solvency.  Just the quality of the people behind the helm.  I'm worried also.  Obama clearly is not a leader.  And who does the other party offer.  An old fool that every now and then makes a clown out of himself.  2 beauty queens that don't know what is up. and various others from the old school that don't really have a clue, and have already proven they don't have what it takes or they would have been prominent and prevalent sooner.

 

And all the "new blood" in Washington has certainly shown their true rotten colors now.  Can't wait to get rid of them.  Sure hope they can't hoodwink their constituents again.

Advisor

Re: Reason for downgrade

Pushing it up to a last minute deal with threats to let your country default has confirmed that your debt is not secure

 

Please provide citations of who threatened to default.

 

If you want to know why the downgrade, I would suggest, as others have, to read the s&p documents.

Advisor

Re: Likely True

All that said, S&P's downgrade has to be somehow politically motivated because there is no doubt the US can pay their debts into the reasonable future. What they want, I don't know.

 

Depending on how you define reasonable future this is false.  There is serious doubt, especially if you include entitlements as debt..  I would argue they've already defaulted as creating money out of nothing is essentially the same thing.   On the current debt trajectory a 400-500bps in interests rates will suck up most of the revenue of the federal government.  When interest rates are zero a 4-5% rise is entirely within the realm of likely.   Pay attention to the world Knapper, allot of countries no one thought would ever default a pretty dang close.

Senior Contributor

Re: Likely True

I guess I shouldn't pay attention to what Steve Forbes says, but I think he put it more strongly than I did.