NorthernStar Posted August 6, 2011 Share Posted August 6, 2011 S&P downgrades US debt from AAA to AA+, but what does that actually mean? Is this just a warning shot across the bows or are there any real practical consequences for the US economy? Link to comment Share on other sites More sharing options...
Rupert_Baehr Posted August 6, 2011 Share Posted August 6, 2011 SH One T! It's a massive problem! The pound's not worth the paper it's written on, but you might see $1.7 (or higher) to the Pound within the next few weeks. As other posters have noted, the US$ is coming under pressure. Many dealers consider that it is inappropriate to retain the US$ as the 'Reserve Currency'. The US has (IMO) an unfair advantage in having the US$ as the reserve currency. If the Brits print more pounds, then the value of the pound tumbles. If the Americans print more Dollars, the prices go up. Perhaps it's time to start a new (hypothetical) reserve currency? Think of a name: (doesn't much matter what you call it. Globopound, Globodollar, Globoarsewiper - the name doesn't matter. Let it be equivalent (on launch day) to 1 UK pound (not because I have any faith in the pound, but because the pound is worth more (per unit( than any currency I can think of. - 1 Globopound would be worth more than one other currency unit. On day one, 1 Globo would be worth £1.00 The following day it might be worth more or less - all currencies would float against the Globo. Oil would be priced in Globos. - If the US$ moved around, that would affect Dollar holdings - it wouldn't affect the price of oil. No country would have excessive leverage in the currency markets, because no country would be able to print the Global currency. The Americans would be upset, but the rest of the world could enter a period of (relative) stability. Link to comment Share on other sites More sharing options...
andyofborg Posted August 6, 2011 Share Posted August 6, 2011 S&P downgrades US debt from AAA to AA+, but what does that actually mean? Is this just a warning shot across the bows or are there any real practical consequences for the US economy? it will most likely cause the cost of the US government borrowing to rise which will have some impact on federal budgets and anyone who uses US Treasury Bonds as collateral or guarantee for something else is likely to have to put up a bit more cash. this extra cost is likely to cause a bit less money to float round the US and world economy which will cause a bit of a slowdown but whether or not it's noticable is another matter. the downgrade is more of a reaction to the last couple of weeks insanity relating to raising the debt ceiling rather than a weakening of the US economy. Link to comment Share on other sites More sharing options...
handypandy Posted August 6, 2011 Share Posted August 6, 2011 Perhaps it's time to start a new (hypothetical) reserve currency? Think of a name: (doesn't much matter what you call it. Globopound, Globodollar, Globoarsewiper - the name doesn't matter. Forgive my ignorance on things economic, but isn't this what SDR's were supposed to be? Link to comment Share on other sites More sharing options...
erebus Posted August 6, 2011 Share Posted August 6, 2011 Well as these Rating agencies change their mind with Ireland, Spain, Italy and the rest, thus giving the banks an excuse to raise the rates, like door stet loan sharks, boosting their yearly bonus culture. Its all about the bonus culture, as in getting the best return for your investment, so while you only get a pathetic return for your savings, the banks were charging amounts that countries could never pay back ever, just like door step loan sharks. Its a game and the banks and the accountants and the rating agencies need and feed off each other, and need covert cooperation in order to be seen as successful. Remember Enron??? How the banks, and accountants fiddled the figures, and since then how has regulation changed??? Well they are self regulating, and such foxes care for the chickens with the best lawyers, and are immune from official regulation, or did I miss a trick? All countries have official debts as do the banks, the figures the public need to stop questioning the economic fabric we all accept as normal. The banks have now agreed to pay back for the PPI fraud they cooked up, outwitting the regulators as usual, but not charges or criminal activity for them. Brilliant. It proves they have changed nothing, and actually gone into overdrive. You accept price rises well above inflation, energy, oil, food and the rest, just as a sedated population should. Inflation officially at 5% energy rises at 20% and basic foods up even more, but we swallow the lies like sweetened mothers milk, and question nothing but maybe mutter a complaint, to the serfs around the money collection counter. Stay ignorant it’s the best policy, sadly I like to know who is screwing me, and why they are doing it, but it seems most enjoy it, gives them more to moan about. Link to comment Share on other sites More sharing options...
Alcoblog Posted August 6, 2011 Share Posted August 6, 2011 S&P downgrades US debt from AAA to AA+, but what does that actually mean? Is this just a warning shot across the bows or are there any real practical consequences for the US economy? I think it means a lot of bankers are turning to Alcoholics Anonymous due to the alcohol fuelled stress relieving strategies they've adopted in recent nonths. Link to comment Share on other sites More sharing options...
Eater Sundae Posted August 6, 2011 Share Posted August 6, 2011 Is there any organisation that vets S&P and can confirm that they know what they're talking about? Link to comment Share on other sites More sharing options...
scentral Posted August 6, 2011 Share Posted August 6, 2011 It can't be that serious. If it was, our 'leaders' - you know, the ones who got us into this mess - wouldn't all be on holiday and would be straight back behind their desks to sort it out. The system is buggered. We've been fed the myth of 'free market economics' when it's all been a cosy cartel run by, and for the benefit of, a few. We've had absolutely no say in this, but it's our pensions and savings that will suffer. Link to comment Share on other sites More sharing options...
HeadingNorth Posted August 6, 2011 Share Posted August 6, 2011 Is there any organisation that vets S&P and can confirm that they know what they're talking about? The ones that don't know what they're talking about, don't get publicity and everyone ignores their ratings. Moody's and S&P are two of the most highly regarded, based on years of experience. Their past record is evidence they know what they're doing. Of course, a glittering past record doesn't mean they are incapable of error; and Moody's still have the USA rated as triple A, although they have attached a "negative outlook" to that rating. Link to comment Share on other sites More sharing options...
Tony Posted August 6, 2011 Share Posted August 6, 2011 The reason given (dithering and point scoring) was perfectly valid. S&P are quite right to make a point, since the USA was hours away from not paying it's bills and sending it's businesses and people broke overnight. If a kick in the whatnots is the only way that politicians will get the message about playing silly politics with the domestic and wider economy then we should simply close our ears when they moan and start voting for something different. Link to comment Share on other sites More sharing options...
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