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90 seconds at 9am: America warned on AAA rating; China vs US trade tensions grow
Bernard Hickey details the key news overnight in 90 seconds at 9am in association with the BNZ, including news Moody's has warned the United States that its AAA credit rating will be endangered within a few years unless it gets its budget deficit under control.
The warning follows similar comments from the other 2 big ratings agencies Standard and Poor's and Fitch. They are worried America's interest payments will exceed 15% of income with a few years. America is unlikely to be downgraded any time soon, but this will keep the upward pressure on interest rates for the long term.
Meanwhile, there are revelations from a receivers report that Lehman Brothers used vehicles known as Repo 105s to systematically hide US$50 billion of debts from its creditors and regulators. Legal action over allegations of fraud are likely for its key executives.
Meanwhile, trade tensions are growing between America and China. America is due to declare China a "Currency Manipulator" within weeks, which could trigger sanctions. The pressure is being felt in many places, including with Google, which is set to withdraw from China within days over plans to stop censoring search results.
9 Comments
"America is unlikely to be
"America is unlikely to be downgraded any time soon"...which more than can be said for the ratings agencies. I give S&P a BB-.....Fitch deserve a C and Moodys little more than B
Can I just ask, what
Can I just ask, what backs the ratings of S&P, Fitch etc? If they are wrong (and I understand they may have been wrong once or twice in the past) then what recourse do their customer have? And if there is no recourse, then why do people use them unless it's just a mirage?
...To cover themselves. Standard Poors
...To cover themselves. Standard Poors said it was AAA so it was safe can then be used to explain why your investments are worth nothing.
Any other country would have
Any other country would have been downgraded long ago, but the big corporates in the US that pay the ratings agencies the greater portion of their income would not be happy to lose their high ratings. This is because a company cannot be rated higher than the soveriegn rating of the country in which it is based.
the sec. comm. would be
the sec. comm. would be wise to dump the ratings agencies. They don't appear to use particularly high tech instruments to assess businesses. The overall assessment is somewhat arbitrary and more a "gut instinct". Ratings fundamantally appear to be linked to size and importance of the organisation to an economy. We all know the outcome of a ratings downgrade - "kiss of death"...
Clearly there is a need
Clearly there is a need for punters to realise the most accurate ratings come from the market..not always in a timely manner...such is life...those who believe S&P, Moodys and Fitch etc also believe in a flat earth and belong to the scientology cult of idiots.
The lessons coming thick and fast are not to apply any value to assets....there can be no asset that will retain a fixed value...not even gold and certainly not bloody used toilet paper currencies like the pound and the Dollar.
The market probably takes little notice of the ratings..knowing they are fudged and cooked to fit the political and business bullshit dished out as quality advice.
So the ratings that these
So the ratings that these agencies provide are inherently flawed in their staistical integrity, they are slanted toward large clients, and they contribute to rather than reduce the elements of risk.
It's like putting the crafars in charge of the spca isn't it?
Here comes the Tsunami !
Here comes the Tsunami !
http://www.bloomberg.com/apps/news?pid=20601068&sid=azA8DpBoy0WI
I will be most interested
I will be most interested to see the outcome of the trade talks this week Aud USD NZD and can't help but wonder if Obama realises that in Godzone anyway it appears to me that every manjack is ready to throw thier lot in with China...... who "are" currency manipulators and export dumpers as accused and as a mighty power should just say so what...! ooooh yea good old NZ just can't wait to get in the bed an git some o that hot yuang............... careful what you wish for ...you just might get it all.