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Do we thank Washington D.C. for the years of debt spending or the impartial (hopefully!) decision of S&P to downgrade the U.S. debt rating because they cannot control their debt spending?
The Dow Jones industrial average finished the day down 634.76 points Monday after a full-day sell-off accelerated in the final hour of trading as investors struggled to absorb Standard & Poor's decision to downgrade the United States' credit rating.
[Updated, 1:34 p.m. Aug. 8: This post has been updated to reflect the final closing numbers of the Dow Jones industrial average.]
Investors piled out of stocks and into a few "safe havens," such as gold and Treasury bonds. The appetite for Treasury bonds suggests that the Standard & Poor's downgrade has not shaken investors' faith in U.S. bonds.
Market experts said the Monday sell-off was sparked by the S&P announcement but was motivated more by growing concerns about the weakness of the global economy.
"It’s really all about economics," said Mike Norman, the chief financial strategist at John Thomas Financial.
The Dow ended the day down 634.76 points, or 5.5%, to 10,809.85. The broader Standard & Poor's 500 index fell even more sharply, finishing the day down 79.83 points, or 6.6%, to 1,119.55.
"It's been harried," said Sal Arnuk, head of Themis Trading, which has its trading floor in Chatham, N.J.
The concern about the U.S. credit rating was amplified when Standard & Poor's announced Monday morning that it was also downgrading the debt of mortgage giants Fannie Mae and Freddie Mac, which rely on U.S. government guarantees. But traders said much of the pessimism Monday resulted from broader concerns about the economy.
"I don’t think the S&P announcement is the lead director of the day -- I just think it is the icing on the cake," said Jonathan Corpina, a trader on the New York Stock Exchange for Meridian Equity Partners.
Markets have fallen nearly every day for the last two weeks and are now down to levels last reached in September of last year.
With the United States' credit rating cut by Standard & Poor's, Treasury bonds might have been expected to lose some of their luster. But investors still appear to be using Treasuries as a haven amid global economic turmoil. The 10-year Treasury bond was trading at a 2.34% yield, down from 2.56% on Friday, indicating that there was heavy demand for the bonds.
Gold, another haven, saw its value rise nearly 3.9% on Monday.
oh,you know. in a basement...cooking ponies into cupcakes....
i thought this was gonna be about dawn of war....we blame the victim,duh.
Deathshead420 wrote:As your leader, I encourage you, from time to time and always in a respectful manner, to question my logic. If you're unconvinced a particular plan of action I've decided is the wisest, tell me so! But allow me to convince you. And I promise you, right here and now, no subject will ever be taboo … except, of course, the subject that was just under discussion. The price you pay for bringing up either my Chinese or American heritage as a negative is – I collect your f g head. [Holds up Tanaka's head] Just like this f r here. Now, if any of you sons of bitches got anything else to say, now's the f g time! [Pause] I didn't think so.
I don't think you can point your finger at any one person/group/party for this. It didn't happen overnight. Course I am sure people will point anyways.
Melchiour wrote:I don't think you can point your finger at any one person/group/party for this. It didn't happen overnight. Course I am sure people will point anyways.
Everything I've been reading says that the downgrade had little to do with it, especially since the rate of T-bills has actually gone down due to demand!
Unemployment is still up, growth is anemic, consumer spending hasn't budged in four years, and there are genuine debt crises in Europe. The S&P downgrade is a brushback pitch, meant to tell Washington to not mess around with the economy, but it's just a trigger for a lot of investor worries.
This message was edited 1 time. Last update was at 2011/08/08 23:13:17
Massive correction. The market returned to pre-crash levels without major economic improvement gliding purely on the back of corporate profits and hope (and china). The market wasn't reacting with great losses to the euro crisis and it didn't really care about japan or weak jobs reports.
It needed a catalyst.
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Do you remember that time that thing happened?
This is a bad thread and you should all feel bad
Is there a particular aspect of the US government's actions that has led to S&P and just S&P alone to downgrade the debt? It seems bold of S&P especially when the other two major credit rating institutions reaffirmed their top tier ranking of US debt.
WarOne wrote:Is there a particular aspect of the US government's actions that has led to S&P and just S&P alone to downgrade the debt? It seems bold of S&P especially when the other two major credit rating institutions reaffirmed their top tier ranking of US debt.
Also, there's worse economies out there that still top tier ranking, such as Spain. I think it might relate to the having just gone to the wire debating how they were going to continue paying their debt, never any question that they'd be able to, just debating 'if'. Also a whole lot of politics, from S&P wanting to look like it was 'doing something' in the wake of the housing scandal, to just jumping on the bandwagon over the freak out over US debt.
“We may observe that the government in a civilized country is much more expensive than in a barbarous one; and when we say that one government is more expensive than another, it is the same as if we said that that one country is farther advanced in improvement than another. To say that the government is expensive and the people not oppressed is to say that the people are rich.”
Adam Smith, who must have been some kind of leftie or something.
sebster wrote:Also a whole lot of politics, from S&P wanting to look like it was 'doing something' in the wake of the housing scandal, to just jumping on the bandwagon over the freak out over US debt.
Somewhat relative to the boldface statement (looks like an op/ed piece):
Standard & Poor’s decision to downgrade the United States has drawn a lot of criticism. The White House called its performance, which included a miscalculation of about $2 trillion, “amateur hour.” Rep. Barney Frank was even less sparing. “These are some of the people who have the worst records of incompetence and irresponsibility around,” he told Rachel Maddow. They are trying to “justify their reputation.”
All of this is true. But it doesn’t make Standard & Poor’s wrong. In fact, this downgrade is arguably serving two important functions: It’s drawing attention to the failures in the American political system, as well as the failures in Standard & Poor’s.
Let’s begin with the country. “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,” Standard & Poor’s said in the statement accompanying Friday’s decision.
After Republicans in Congress spent three months weighing whether or not to default on our debt and Senate Minority Leader Mitch McConnell said that paying our bills would never again be a foregone conclusion, can anyone really argue with that? After every Republican presidential candidate save Jon Huntsman either remained silent on, or flatly opposed, the deal to raise the debt ceiling, can anyone really say that U.S. debt is completely riskless? That there’s no chance of a political miscalculation, and if there is such a chance, that they can perfectly predict the outcome of the ensuing chaos?
In Washington, it’s almost trite to say that the political system is broken. It’s been clear for some time that things really are different, that norms and procedures that once kept fractious congresses functioning have eroded with terrifying speed. If anything, S&P is, as usual, noticing the deterioration too late. But that doesn’t mean the deterioration is not real, or that it should be ignored.
That said, S&P’s report is a joke. The problem isn’t the agency’s $2 trillion mistake. It’s possible for the agency to have made that mistake without harming its underlying point about the weakness and unpredictability of American political institutions. But S&P hasn’t confined its argument to our political institutions. The original draft of its report included a section in the executive summary laying out the deficit math for the next decade. When that math proved wrong, S&P simply deleted the section. But that’s inconsistent with the calculations S&P left in the final report.
In both versions, Standard & Poor’s says it would upgrade our outlook from “negative” to “stable” if the Bush tax cuts for income over $250,000 expire. That would net Treasury about $900 billion over 10 years. So according to S&P, $900 billion is a big deal. And it’s a big deal because of how much it would reduce the deficit. So let’s look at that.
The original report says that $900 billion in fresh revenues would mean net public debt drops from an estimated 93 percent of gross domestic product in 2021 to 87 percent of GDP. The second version of the report — the one written after they discovered a $2 trillion mistake — revises its estimate for America’s baseline debt path down to “74 percent of GDP by the end of 2011 to 79 percent in 2015 and 85 percent by 2021.” In other words, S&P’s technical correction improved our deficit outlook by more than letting the high-end tax cuts expire, which S&P had said would raise enough money to stabilize our rating. If the numbers mattered, then by S&P’s own logic, that should have changed the agency’s opinion of our finances.
Similarly, the firm has previously explained that while a $4 trillion deal could have saved the U.S. credit rating, a $2.4 trillion deal — which is what we got — was insufficient to stabilize the debt. But because their original calculations misplaced $2 trillion, the deal and the correction should have added $2.4 trillion plus $2 trillion to our bottom line. That, again, is more than $4 trillion.
I spoke with Standard & Poor’s about these concerns. The response wasn’t particularly compelling.
“The point we were making on the numbers is that nobody we know is claiming this deal, however you do it, will halt the rise in the debt burden,” said David Beers, an analyst responsible for sovereign debt.
That’s true, but $4 trillion is $4 trillion is $4 trillion. The debt burden doesn’t care whether our fiscal picture improves because of a deal or the combination of a deal and a technical correction.
My hunch is that S&P was making a political argument and felt the need to cast it as deficit arithmetic. Then, when its arithmetic proved wrong, it was left looking foolish. As it stands, you cannot coherently merge the first and second versions of S&P’s explanation of the downgrade. That should tell you something about how rigorous its framework is, even if it doesn’t obviate the still-legitimate points it made about our political system.
Melchiour wrote:I don't think you can point your finger at any one person/group/party for this. It didn't happen overnight. Course I am sure people will point anyways.
Wheres Marilyn Manson when ya need em
I thought he wasn't born with enough middle fingers. Better get Chuck Norris, since he's got that fist under his beard.
As to the Dow, I'm not fussed. I've got plenty of water and shotgun shells. I'll ride out the impending societal collapse in style and comfort.
Drink deeply and lustily from the foamy draught of evil.
W: 1.756 Quadrillion L: 0 D: 2
Haters gon' hate.
warpcrafter wrote:And that's your tax money at work, folks.
Because everything was just fine till President Obama was sworn in.
I look wistfully back at December 2008, when the deficit was zero, the budget was balanced, and protesters were still described as traitors and un-american.
lord_blackfang wrote: Respect to the guy who subscribed just to post a massive ASCII dong in the chat and immediately get banned.
Flinty wrote: The benefit of slate is that its.actually a.rock with rock like properties. The downside is that it's a rock
I think S&P is a perfect demonstration of The Magic Of The Market failing miserably. A ratings agency that gives 'perfectly safe' ratings to absurdly shaky securities based around mortgages that you expect defaults on even if the real estate market never sagged should be completely trashed and out of business once it's terrible ratings cause the economy to crash. Instead, they're still around, still taken completely seriously, and still allowed to screw up bits of the economy with their voodoo ratings.
warpcrafter wrote:And that's your tax money at work, folks.
Because everything was just fine till President Obama was sworn in.
This what makes me laugh as well, its the same in the UK. The Labour party were in charge for 13 YEARS, the market crashed in 2007, the outgoing chancellor left a note on the incoming guys desk saying "THERES NO MONEY LEFT, LOLZ!" and now its the current guys fault were skint?
Im stunned by this logic fail.
Obama has been in charge for what, 2 years? How the feth can people blame all this gak on him?!
I mean, I don't even like Obama, but its obvious when people are just being sickeningly partisan.
Can people not bring themselves to possibly accept any blame? Im not particularly well versed in US politics being an Englishman, but BC had a surplus right? And Bush was running up epic debts pretty much the entire time he was in office! How then, can something like this be Obama's fault when he is a relative newcomer? You cant feth an economy up over night!
We are arming Syrian rebels who support ISIS, who is fighting Iran, who is fighting Iraq who we also support against ISIS, while fighting Kurds who we support while they are fighting Syrian rebels.
warpcrafter wrote:But Obama campaigned on a platform of change. Where is the change? Oh yeah, it's been change alright, for the worse.
Yeah, he could have campaigned on a platform of continuing the outright theft and incompetence that marked Bush's two terms. The problems we're facing now started back in Clinton's term (the fall of the housing markets is tied to the changes in lending practices that occurred under his watch), but are mostly due to the tax cuts Bush offered. The problem isn't that Obama changed things for the worse, it's that he didn't change things very much at all.
Running on a platform of change, we got:
A crappy healthcare bill passed for the political expediency of being able to say that a healthcare bill was passed. A poorly worded and thought-out healthcare bill that did very little and, I believe, was repealed already. (Maybe I'm wrong, but I think that was one of the first things the GOP did once they got control on congress back).
No real change in our overseas military commitment. No bringing the troops home. It should be mentioned, however, that although the greater overall strategy hasn't changed, we have been more successful in this area under Obama than under Bush, including finally getting Bin Laden.
No real change in our financial policies. Bush's tax cuts are still out there, and they're still screwing us. Of course, because of the housing collapse and auto collapse we funded bailouts that we probably shouldn't have, having public dollars prop up failing private institutions is ridiculous, and has allowed the poor practices in those industries to continue. Basically, we spent way more than we had to bail out the banks and auto makers, who turned around and rewarded their already-rich investors and employees with money taxed from the rest of us. And, not just taxed from the rest of us, borrowed from our children and grandchildren.
Obama's biggest failing isn't that he changed anything, it's that he said he would change things, and didn't. It's that he said he was bigger than the special-interest groups and lobbyists that actually run Washington, that he built up all sorts of unreasonable expectations about what he'd be able to do, and it turns out, he's not that special, he's not that guy who can break how the system works (for the better), and he's just another politician doing time.
mattyrm wrote:Obama has been in charge for what, 2 years? How the feth can people blame all this gak on him?!
At what point does he bear responsibility for what's going on? Unemployment was 7.2% when he entered office. Now it's 9.1%.
The national deficit was $482 billion for FY 2009. The current deficit is around 1.5 trilliion.
Does Bush deserve some of the blame for this? Of course! He should have reduced spending, not passed Medicare Part D, used the '02-08 boom years to reduce the federal debt, and pushed harder on his Social Security plan.
I'll let the man say it himself:
This message was edited 1 time. Last update was at 2011/08/09 12:21:18
Blaming Obama for the current mess is a little like blaming a reliever for giving up runs when he came into the game with the bases loaded. He's made mistakes, but he also inherited a pretty bad situation.
He's also faced the most rabidly polarized environment since at least Ford. Meaning, it's hard to tell the policy disagreements apart from the vitriol. The old joke that the right would oppose Obama's announcment that he cured cancer is becoming less funny, as policy becomes subordinate to beating him.
biccat wrote:
Does Bush deserve some of the blame for this? Of course! He should have reduced spending, not passed Medicare Part D, used the '02-08 boom years to reduce the federal debt, and pushed harder on his Social Security plan.
I think you forgot a couple of unfunded wars and tax breaks....
"But i'm more than just a little curious, how you're planning to go about making your amends, to the dead?" -The Noose-APC
"Little angel go away
Come again some other day
The devil has my ear today
I'll never hear a word you say" Weak and Powerless - APC
I'm also not sure what, exactly, the government can do to reduce unemployment.
And don't say "cut taxes." Companies are profitable, so it's not like they can't hire more staff. The money is there.
Unemployment is up because consumer spending is way down. Many of the jobs lost (and not regained) where in retail, construction, and other consumer driven industries. Companies can be profitable by being more effecient, and exporting thanks to a weakened dollar.
Part of this is simply time. Much like their government, most households are limited in their spending due to past debts. I can't buy a new car because I have to pay off student loans. People ran up massive debt pre-crisis, which means there will be a retrenching period for even the employed middle classes.
So, while it seems like simple class warfare to say "tax the rich," it's actually the only place to get money that won't further hurt the economy. Cutting social safety net spending (unemployment, disability, etc) seems appealing, but those dollars are all pumped into local economies, buying goods and services which employ people. Ending Bush-era tax cuts would not hurt hiring (whcih is anemic anyway), as the people making the real decisions aren't paying income tax, their paying capital gains tax!
This message was edited 2 times. Last update was at 2011/08/09 12:34:55
S&P have a job to do and blameing them for the market problems is like blaiming your doctor for your illness. They tell investors what they think the risk is and investors use that as part of a big bunch of data. The fact remains that the US government came painfully close to defaulting on debt. Now people don't trust them not to go over the edge for nothing more than an ideology.
alarmingrick wrote:I think you forgot a couple of unfunded wars and tax breaks....
I'm not sold on the wars in Iraq and Afghanistan being a bad idea. Bad in execution perhaps (there's no reason we should have troops there for so long), but not bad in the inception. But the wars weren't the cause of our current economic mess.
As for tax breaks, they aren't part of the spending problem. Heck, government revenue increased after the Bush tax cuts went into effect.
The government could offer incentives to hire people. They could create disincentives to off-shoring jobs.
The Republicans, on behalf of their corporate allies are pushing for a corporate tax holiday. They believe that corporations are leaving a lot of their money overseas. The corps claim this is because the tax rate here is too high, and that if they could have a tax holiday, where they pay a lower rate for a short time, they'd use it to bring profits back home.
I don't think corporations should be let off the hook that easily, because they won't use that money to make jobs, they'll return it to their investors.
But, there's an opportunity there. The Government could say, as a quick example, that if you create new jobs, you get a tax break of a proportionate amount to the jobs you create. (A 100 person company that creates 1 new job gets a 1% reduction in their tax rate for that year, A 10,000 person company that creates 20 new jobs gets a .2% tax break, and so on).
Corps want lower taxes. Government wants corps to hire people. There's opportunity there.
The other concept goes against a lot of what people think about globalization, but it's essentially tariffs. Why should an American company hire American workers to do unskilled labour at $7.25/hour (with OSHA oversights and the like), when they can hire someone in Indonesia to do the exact same job for $.72/hour, and without the overhead. Shoes imported from Indonesia will sell for the same amount as shoes made in the USA.
Well, that's the problem, isn't it. The solution is to reinstate import tariffs. If those shoes made overseas have to pay a $7 tariff upon entering the country, now the US worker is competing on even ground with the Indonesian worker. The incentive for the company to make the shoes overseas is gone.
But tariffs are kind of a no-go for some reason. We (Americans) like our stuff cheap, and that means we want to pay the guy who makes it $.72 instead of $7.25. When faced with the real costs of manufacturing things in the US, most consumers choose cheap and imported over Made in the USA and priced accordingly.
Well, that's why the US doesn't make things anymore, and if you're not making things, there aren't that many jobs.
I think it's a good start. Historically, real change only ever comes when the common man can no longer afford to buy a loaf of bread. Perhaps that's what Obama was referring to.
(Disclaimer: I don't like republicans OR democrats. I honestly cannot for the life of me tell the difference. Corporation-run oligarchy annoys me.)
Polonius wrote:I'm also not sure what, exactly, the government can do to reduce unemployment.
My opinion, nothing. My feeling is that the federal government can, generally, do nothing to affect unemployment in specific and the economy in general. I think the government can make the economy worse via bad policies and needless regulation*, but they cannot improve it directly: only indirectly by providing a fair playing field, breaking monopolies, that sort of thing.
*not that I'm a proponent of dergulation in general. I'm speaking in generalities.
biccat wrote:I'm not sold on the wars in Iraq and Afghanistan being a bad idea. Bad in execution perhaps (there's no reason we should have troops there for so long), but not bad in the inception. But the wars weren't the cause of our current economic mess.
A.) Did the wars cost an enormous amount of money?
B.) Did we fund these wars (via either revenue gains via tax increases, or via commensurate spending cuts elsewhere)?
Maybe they're not the whole problem, but the thinking behind them is exactly what caused our current economic mess.
Switching gears for a sec, I don't blame Obama for the economy, in general. He walked in onto the table on turn 5, with only 400 points of Orks left vs an untouched 2K Grey Knights army. I do blame him for choosing to assault the GK terminators with his Lootas. He told Eric Cantor not to call his bluff, and Eric Cantor turned out to be the wiser on that one. Not only has he not improved the situation, he's sort of made it worse by buckling to extremism.
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Redbeard wrote:But tariffs are kind of a no-go for some reason. We (Americans) like our stuff cheap, and that means we want to pay the guy who makes it $.72 instead of $7.25. When faced with the real costs of manufacturing things in the US, most consumers choose cheap and imported over Made in the USA and priced accordingly.
Well said. Americans want products produced by workers for a fair wage in a safe, clean workplace by employees with access to fair pay, good benefits, clean air and water, and safe food, and we're absolutely unwilling to pay even a fraction of the cost of goods produced in such an environment.
This message was edited 1 time. Last update was at 2011/08/09 13:00:29
lord_blackfang wrote: Respect to the guy who subscribed just to post a massive ASCII dong in the chat and immediately get banned.
Flinty wrote: The benefit of slate is that its.actually a.rock with rock like properties. The downside is that it's a rock
g head. [Holds up Tanaka's head] Just like this f 
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