Financial clusterfuck in Europe - Page 11 - MensTennisForums.com
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post #151 of 1005 (permalink) Old 08-06-2011, 04:22 AM
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Re: Credit crisis in Greece, others to follow...?

And so it begins:

Quote:
NEW YORK (CNNMoney) -- Credit rating agency Standard & Poor's on Friday downgraded the credit rating of the United States, stripping the world's largest economy of its prized AAA status.

In July, S&P placed the United States' rating on "CreditWatch with negative implications" as the debt ceiling debate devolved into partisan bickering.

To avoid a downgrade, S&P said the United States needed to not only raise the debt ceiling, but also develop a "credible" plan to tackle the nation's long-term debt.

In its report Friday, S&P ruled that the U.S. fell short: "The downgrade reflects our opinion that the ... plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics."

S&P also cited dysfunctional policymaking in Washington as a factor in the downgrade. "The political brinksmanship of recent months highlights what we see as America's governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed."

A Treasury Department spokesman pushed back on the rating change, saying that S&P's analysis was flawed.

A source familiar with the matter said S&P initially miscalculated the growth trajectory of the nation's debt, and then went ahead with its downgrade anyway.

The source also said S&P didn't give enough credit for the debt-ceiling compromise, which paved the way for more than $2 trillion in spending cuts over the next 10 years.

However, one of S&P's explicit criticisms of the compromise was that it didn't address the biggest drivers of the nation's debt -- Social Security and Medicare -- and didn't allow for additional tax revenue. ("What's wrong with the debt ceiling deal?")
http://money.cnn.com/2011/08/05/news...x.htm?iref=BN1

Well it's about fucking time.
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post #152 of 1005 (permalink) Old 08-06-2011, 11:43 AM
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Re: Credit crisis in Greece, others to follow...?

Standard and Poors are fuck**g asshole.
This downgrade is unjustified.
Go to hell S&P
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post #153 of 1005 (permalink) Old 08-06-2011, 06:50 PM
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Re: Credit crisis in Greece, others to follow...?

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Standard and Poors are fuck**g asshole.
This downgrade is unjustified.
Go to hell S&P
How is it unjustified?
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post #154 of 1005 (permalink) Old 08-06-2011, 07:01 PM
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Re: Credit crisis in Greece, others to follow...?

They justified it for political reasons first.
Secondly, their figures are wrong as Obama's administration said.
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post #155 of 1005 (permalink) Old 08-06-2011, 07:17 PM
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Re: Credit crisis in Greece, others to follow...?

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They justified it for political reasons first.
Secondly, their figures are wrong as Obama's administration said.
Don't you think the Obama administration has an incentive to accuse S&P of getting it wrong? Were you expecting the administration to confirm that yes, the US government will in fact default on its debts?

And what incentive does S&P have to provide the people who rely on (and pay for) their recommendations with information that has been manipulated for political reasons? I can't imagine that lying to customers is a particularly good business practice.

Furthermore, since they're heavily regulated by the executive branch, which of course is completely controlled by Obama, they have a huge disincentive to portray the government in a negative light as there is a very good chance they'll face serious political and regulatory retribution. The Obama administration even has the power to revoke their license. Considering these risks, I consider it even more significant that S&P downgraded it.

Of course, anyone who's been paying attention knows that the US government's debts are in fact unsustainable and it will eventually default (or print its way out). The ponzi scheme brought on by western "democracy" will collapse. I'm not going to fault S&P for sounding the alarm.
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post #156 of 1005 (permalink) Old 08-06-2011, 07:34 PM
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Re: Credit crisis in Greece, others to follow...?

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I'm not going to fault S&P for sounding the alarm.
If only they are whistle-blowers but no they are worsening the situation actually.
Overreacting is the worst thing possible and S&P did it.
But you can think this downgrade is fair, I don't think so.
Rating agencies are a curse for the economy because they are the personification of the asymmetry of the information in capital market.
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post #157 of 1005 (permalink) Old 08-06-2011, 07:49 PM
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Re: Credit crisis in Greece, others to follow...?

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If only they are whistle-blowers but no they are worsening the situation actually.
Overreacting is the worst thing possible and S&P did it.
But you can think this downgrade is fair, I don't think so.
Rating agencies are a curse for the economy because they are the personification of the asymmetry of the information in capital market.
They're worsening the situation for the government, but back when government finances were in order S&P actually helped it by analyzing the data and confirming to investors that US debt was a safe investment, thereby saving the government money on borrowing costs. S&P has a duty to the people who rely on its investment recommendations. Lying simply to prop up a reckless government whom it has no obligation to support would be immoral, as it deceives the people who pay it to provide objective analysis.
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post #158 of 1005 (permalink) Old 08-06-2011, 08:01 PM
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Re: Credit crisis in Greece, others to follow...?

http://www.guardian.co.uk/commentisf...owngrade-spain

Here is my opinion but brilliantly explained.
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post #159 of 1005 (permalink) Old 08-06-2011, 08:31 PM
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Re: Credit crisis in Greece, others to follow...?

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Originally Posted by Grassquet View Post
http://www.guardian.co.uk/commentisf...owngrade-spain

Here is my opinion but brilliantly explained.
What's the point of this article? That the rating agencies have a lot of power? What is his proposal? He has none. Attacking the ratings agencies allows governments to distract the public from the real issue, which is that government finances are shoddy in most western nations. He is furthering this charade, deceiving his audience.

What would happen if there were no ratings agencies or if their ability to analyze investments and provide recommendations were curbed? Investors would have less insight into the government's finances and would therefore be less likely to loan them money, or would require greater interest rates to compensate for the added risk. Governments, therefore, actually benefit from the ratings agencies, especially when their finances are actually in order. Think about it, if the ratings agencies were shut down today, investors would be left to their own devices when evaluating government debt, which is quite a task given the complexity of government finances. Many would just assume to avoid it, which of course would send government borrowing costs skyrocketing.

When you buy stock in a company, do you just blindly throw money at a ticker symbol? Of course not. You might take a look at their financial statements, which have been verified by a third party. Furthermore, you might do additional research on the company. You would probably also look at the analyses and recommendations of other researchers. This provides an incentive for the company to keep its finances in order, because otherwise there are a lot of people who will call them out on it. Why would you loan a government money without doing the same?

If governments don't want people evaluating their debt, then there's a simple solution: don't issue debt.
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post #160 of 1005 (permalink) Old 08-06-2011, 08:47 PM
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Re: Credit crisis in Greece, others to follow...?

It should also be noted that a big reason the ratings agencies have so much power is because governments have frequently required banks, certain investment firms, and other financial institutions to carry a certain amount of AAA-rated investments as determined by government-licensed ratings agencies. Governments have therefore artificially limited the number of certified ratings agencies, boosting the influence of each. On top of that, by forcing so many financial institutions to rely on AAA ratings, it also artificially boosted the significance of a downgrade. Governments, of course, benefitted from this when they had AAA ratings as it lowered their borrowing costs.
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post #161 of 1005 (permalink) Old 08-06-2011, 09:33 PM
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Re: Credit crisis in Greece, others to follow...?

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Originally Posted by Chip_s_m View Post
Governments have therefore artificially limited the number of certified ratings agencies, boosting the influence of each. On top of that, by forcing so many financial institutions to rely on AAA ratings, it also artificially boosted the significance of a downgrade.
Here is my point. Rating agencies could be useful but in fact they are not because as you said Governments benefit from AAA but this rating is artificial.
This artificial rating leads to understate risks in favorable conjuncture and worsening the situation in crisis situation.
They are as blind as everybody and cannot know if the crisis is near or not so when the crisis appears they overestimate risk because they weren't able to predict it.
They are not reliable.
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post #162 of 1005 (permalink) Old 08-07-2011, 12:39 PM
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Re: Credit crisis in Greece, others to follow...?

Code:
Standard & Poor's, one of the three principal US 
credit ratings agencies, announced late Friday a downgrade
of United States debt, for the first time ever. The agency
had overstated the debt by $2trn in a document it issued 
to the US Treasury prior to the planned release of a press 
statement after the close of markets.


The agency cut its rating of long-term federal debt to AA+, 
one notch below the top grade of AAA and directly blamed the 
policy deadlock in Washington DC, by citing the "gulf between 
the political parties over fiscal policy."

In a revised statement, S&P said "the downgrade reflects our 
view that the effectiveness, stability, and predictability of 
American policymaking and political institutions have weakened 
at a time of ongoing fiscal and economic challenges to a degree 
more than we envisioned when we assigned a negative outlook to 
the rating on April 18, 2011."

The US had kept the top rating for 70 years and downgrade puts 
the nation below countries such as Germany, France and Liechtenstein, 
among about a dozen countries. S&P put the new grade on "negative 
outlook," meaning the U.S. has little chance of regaining the top 
rating in the near term.

The Obama administration reacted with anger, saying that the company 
had made a significant mathematical mistake in a document that it 
gave to the Treasury on Friday afternoon, overstating the federal 
debt by about $2trn.


“A judgment flawed by a $2trn error speaks for itself,” a Treasury 
spokeswoman said.

S&P said it didn't believe the error was so significant. It was a 
technical error that related to the future ratio of US debt to the 
size of the economy, with S&P projecting a larger share than many experts
from http://www.finfacts.ie/irishfinancen..._1022874.shtml

Standard and Poor’s (S&P) presented a judgment about the credit rating of the U.S. that was based on a $2 trillion mistake
Really fair downgrade of course, really fair...
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post #163 of 1005 (permalink) Old 08-07-2011, 01:59 PM
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Re: Credit crisis in Greece, others to follow...?

Grassquet, why are you so obsessed with the rating?
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post #164 of 1005 (permalink) Old 08-07-2011, 02:04 PM
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Re: Credit crisis in Greece, others to follow...?

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Originally Posted by Bilbo View Post
Grassquet, why are you so obsessed with the rating?
Because we are discussing about the downgrade of USA by a rating agency.
It would be difficult to ignore rating when we are discussing about this, no?
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post #165 of 1005 (permalink) Old 08-07-2011, 11:51 PM
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Re: Credit crisis in Greece, others to follow...?

Rating agencies are overrated. Investors can make their own decisions based on budget and economic data.
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