Standard & Poor's downgrades US Treasury debt to AA+ from AAA and says the outlook is negative

Standard & Poor's downgrades US Treasury debt to AA+ from AAA and says the outlook is negative

Here is what Standard & Poor's actually said.

"We have lowered our long-term sovereign credit rating on the United States of America to 'AA+' from 'AAA' and affirmed the 'A-1+' short-term rating.

"We have also removed both the short- and long-term ratings from CreditWatch negative.

"The downgrade reflects our opinion that the fiscal consolidation 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.

"More broadly, 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.

"Since then, we have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government's debt dynamics any time soon.

"The outlook on the long-term rating is negative. We could lower the long-term rating to 'AA' within the next two years if we see that less reduction in spending than agreed to, higher interest rates, or new fiscal pressures during the period result in a higher general government debt trajectory than we currently assume in our base case."

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wow. Hold onto your hats

A quick solution to GFC II....

Disband the rating agencies and ban them forever...(They brought on GFC I, so don't deserve to be around any more to bring on one more).

They didnt bring it on.....why do you think so?  allowed it to happen maybe.....

regards

This is huge and the spin doctors will be out in force.

Don't blame the rating agencies ,blame debt. And the failure to control govt spending.

I suppose this is the change Obama promised his voters,an unprecedented down grade for the US.

Bring on the Tea Party.

That ninny Franks has said there is zero chance that America would default on its debts....what he didn't say was the debts will be repaid with the debased rubbish that is falling in value every day. But then he is a politician. 

Delete - (Repeat of info. in story!)

Ok it means the cost of credit will rise everywhere...and the economies dependent on credit will suffer...there is a lesson in here somewhere!

I am speechless.

holy crap, does the nyse have a stop trading % when the markets are tumbling, will this downgrade drop the dow by 1000 points, wow what a ride the markets are going to have when they open. interested in hearing other guess on how much the dow will lose on tuesday

We open first Snappy!

lets face it the downgrade was pretty obvious, but do you think markets that thrive on fear and greed have priced this in, i dont think so. what  do you think the nzx will drop by on monday, i say 180 points then another 180 on tues. what you think wolly

NYSE has a "limit down" mechanism of 10% which, if it gets triggered, the exchange closes for 30 minutes, then reopens. If it continues down they close for another half hour and so on. The first indication will be the YM Dow and ES emini futures. Globex and CBOT futures exchanges open on Sunday Night US time.

Monday Morning: US Globex electronic trading futures open 5:00 pm Sunday NY time (Monday 7:00 am AEST) (Monday 5:00 am NZST)
 

The market will fluctuate Snappy...the thing to watch is the rise in the cost of credit for the banks as they try to roll over the billions in a world market shitting itself and discovering the US toilet paper is not very absorbant.

I am picking disturbance moving on into solid demand for utilities and stable exporters of food and health product. This is a good time to be investing in the market but a time to think and not just rush blindly into one of the many holes.

The truth about the world markets is emerging from behind a wall of media BS and govt lying all wrapped up in clouds of worldwide reserve bank fraud. It's not a pretty picture. Growth will be low for some time..in fact for a bloody long time...I would look for a retreat in commodity prices and greater pressure post election on govt cost cutting...The size of the state is set to shrink.

This is the only option now if National hope to reach 2017 as govt because they will not...repeat...WILL NOT get their promised 170ooo new jobs from the spin and BS game. Bill English is likely to fall into his own fiscal hole if he doesn't hit the fat cutting at a run post November....it has clearly become a race to austerity or death from debt.

Cash is king but cash is constantly being destroyed by the RB and govt debasement policies..the determination to allow inflation at over 3%pa to eat away people's savings. This is a bloody disgrace...a judgement on the shite govt in this country.

The rebuild in Chch and the rotting homes farce..these are set to cause massive market price rises as all involved make their move to grab as much cash as possible...the outcome has to be a collapse in building activity elsewhere in NZ. No good warning the idiots in wgtn of this..they don't give a rat's arse. They are counting the fat gst take instead. All eyes are turning away from the greater long term damage...somebody else's problem!

 

you make alot of sence wolly,  it is an unforetunate world we live in where goverments blind the average jo bloggs with bullshit / propaganda to be re elected, however this happens all around the world. something tells me lots of governments are about to be caught with their pants down. dont think we can blame our goverment for whats about to unfold, unforetunately we will bare the brunt of other countries bad governing decision no matter who is running our country

This government can be blamed for its incompetent denial of reality -- e.g. the bullshit projections it used in this year's budget, its pro-cyclical fiscal policy, its denial of peak oil, its failure to acknowledge and address climate change imacts ....

Well what do you expect when this bimbo is leading the government?

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10743177

And that's the one good thing about a "free"-market economy, if Key et al haven't got the balls to make tough decisions the market will do it for them.

I hear Saudi market lost 5.5% on Sat

Based on this wonderful news of USA downgrade, fear & uncertainty, stockmarkets crashing etc - NZ will of course be cranking up the OCR in a big way - as per the NZ bank economists rosy upbeat view of the fantastic up and up NZ economy - oh boy we're overheating . In fact NZ is 'uncoupled' according to Westpac haha . we 're so strong we can power up on our own without USA .... Too much overheated economic activity ... Inflation thru the roof ... Yeah Right

No, no.  It is all going to be all right.  We are after all a safe haven.  We know this.

Of course we are going to be fine. World just having a little hiccup. Our growth will soon be 5%, interest rates 9%, unemployment 4%, consumers buying up large, ....

downgrade a day after a 5% fall.

hmmm    ;+)

risk free now got some cost so everything else must require a higher return

Only ASX/NZX is open on Monday?, it will be Monday night and Tuesday morning for the action?

Who needs soap operas....

regards

World markets braced for flight to safety

World markets are expected to open heavily down on Monday after the decision by Standard & Poor's to downgrade the US sovereign credit rating from AAA to AA+.

http://www.telegraph.co.uk/finance/financialcrisis/8686552/World-markets-braced-for-flight-to-safety.html

Interest rates going nowhere...

http://www.telegraph.co.uk/finance/economics/8686263/Bank-of-England-to-...

Meanwhile over the atlantic....

"They'll assemble as US growth forecasts for 2012 are being hacked back to around 2pc or less. Everyone suddenly has an opinion on whether a recession is around the corner. Bank of America Merrill Lynch puts the odds at 35pc. IHS Global Insight estimates it at 40pc. David Rosenberg, one of the small band who accurately predicted the last downturn, believes the US might already be in it."

http://www.telegraph.co.uk/finance/financialcrisis/8686128/Americas-pain...

and hyper-inflation is right around the corner,  right?........right?

regards

"“The Great Moderation” was driven by a debt-financed speculative bubble, which would necessarily burst, because of the debt added to the economy’s servicing costs without increasing its capacity to finance those costs. At some stage, the growth of unproductive debt had to falter, and when it did a serious financial crisis would ensue as aggregate demand collapsed. The policy rescues.... have not addressed the fundamental cause of the crisis, which was the excessive level of private debt. The deleveraging that (was) predicted has thus been slowed to some degree by government action, but the need for that deleveraging has not been removed.....the scale of that potential deleveraging appears certain to exceed that experienced in the Great Depression." (Keen 2010)

Even the Long depression.........

Greed is good eh?

Sadly those who will be paying wil, mostly not be those who benefited.....It will be interesting to see how long the republican party lasts....(as it is, an extremist right wing party)....

regards

And the irony, Ostrich, is that SocGen were so very good at it in the 80's and 90's! The likes of Greg Medcraft, securitisation, ( now ASIC chairman) and Antoine Paille ( their Option guru) set them to the fore of the pack. When the Kerviel scandal broke, that for me, was the clue that if the best-of-the-best had faltered, it was time to head for the exits.

so a flight to safety, has always ment a stronger US dollar, surely after this downgrade the us $ is not a safe haven, should this not make it weaker ? where too for the nz $

Higher  US$ interest rates = higher US$ currency/lower NZ$ = lower gold/all assets?

I would have thought that gold is now about the only place left to go. 

Up to now I have leaned toward cash, but now there is doubt over the USD as a safe haven. 

Yes there will be some cashing in for liquidity, but in NZD terms gold is likely to stay flat in that circumstance don't you think?

How are those plans to short the NZD going Ostrich?

Who the hell would you trust your money with.Lol.

hmmmmm lower gold, i thought gold would rise on this (safe haven idea) idont think i will be rushing down to buy tin food just yet, might store some fresh water though. cant see the carbon credits sticking around very long if goverments and the poeple cant afford to pay for them. pleased i cashed in 110k of them a month ago.

please excuse my lack of knowledge but in most case,s if a business had to borrow more money just to pay it's bills/ debt most would fail, i cant see any differnce between a business and running a countries economy.

If a business was failing in this way to turn it around you would need to find more income to reduce debt.

Why in  nz case did our government choose to give us tax cuts knowing they would have to borrow more money to cover the deficit      

Anything - or nothing! could happen tomorrow - depending on what 'magic' is/isn't conjoured up in the next 12 hours. That's why my response to you had a "?". But in the wider scheme of things, deficit financing ( borrowing to buy assets, or pay for existance) has probably run its course. The only action left, is to borrow, to 'stay alive' (and pay higher interest rates to do it), and reduce expenditure. ( kind of like SCF, in a way). Eventually life goes on; the debts are repaid/extinguished and asset prices are re-set at a lower level. Money becomes worth more, in comparison.

i get it, rather than raise more revenue, the US can reduce expenditure on things like war mongering in other people's back yards and let someone else discover what soil type's are on mar's. Well that's great for them, how are we going to achieve the same thing.

I dont mean to sound cynical but do you believe, taking into account the current debt levels and the aging population( which brings with it massive cost pressure partically in health) that there is anyway the US can crawl out of this situation on exspenditure reduction alone or will it be left to the almighty tax payer to come to the rescue as well. I think so, it's called cruel to be kind.

"Saudi Arabia's stock market dropped 5.46pc on Saturday as it became the first exchange to react to the historic US credit downgrade....all shares tumbled"

SA has more reason to worry than most, not about dosh, but about existence. They're in the process of putting in 10 - repeat 10 - nuclear power-plants.

A Saudi student at Otago Uni did her study into Saudi oil supplies. Her result tallies with the number Jefferey Brown / Sam Foucher et al came up with on The Oil Drum - by 3020, SA will be using all her production (what's left of it, Ghawar peaked in 1980) just to satisfy internal demand.

That's the only swing producer left on the planet, trending to a nil export.

Then they've just got sand. I'd be full-noise into plan-b, if I were them.

Meanwhile, all the types here who somehow thing you can have 'wealth' ex-having energy, witter on. Sure, there are the powerful at the top (they always are) but even they can't outrun the end of a system which can't continue without continual exponential growth.

We're living in the most interesting time ever. Homo Sapiens, meet Limits to Growth. Limits to......oh, I was forgetting, 99.999 % of all species are currently extinct. You've met a few before.

Did any of them arrogantly/ignorantly put up an artificial fiscal system and think it would outweigh physics too?

 

Saudi alarmed by high oil demand

Official report warns local supply may not be enough in 2030

By 

  • Staff

Published Sunday, June 19, 2011

Saudi Arabia is consuming up nearly a third of its crude oil output and supply could fail to meet domestic demand in 2030 if the high consumption trends are maintained, according to a government report.

The Gulf kingdom, the world’s top oil exporter and largest Arab economy, currently produces nearly 8.5 million barrels per day of crude but local demand is as high as 2.5-3.4 million bpd, mostly used in power generation, said the report by the state-controlled Saudi Electricity Company (SEC).

The report suggested banning work of major shopping outlets during the afternoon period until 7.00 pm and limiting work periods for government departments to between 6.00 am to 12.00 noon in summer to save energy.

“The current oil production levels of around 8.5 million bpd will not be enough to meet domestic demand in 2030 if the current growth in local consumption continues,” said Abdul Salam Alyamani, SEC’s vice president for relations.“These high growth rates constitute a major challenge to Saudi Arabia in the long term as it relies on oil exports to provide nearly 80 per cent of its income.”

Alyamani, quoted by local newspapers, warned against “ignoring repeated government calls for cutting power and water consumption.”

http://www.emirates247.com/news/region/saudi-alarmed-by-high-oil-demand-2011-06-19-1.403349

 

The elite cartel of US ratings agencies ( S&P / Moodys / Fitch ) are a bunch of self-indulgent fools , lacking any commonsense .

....... tranches of CDO's , CMO's , and the like were given AAA ratings before the global financial crisis ......

But the USA as a country ,  is now down-graded ? ........ S&P are totally brain-dead .

....... about time that the ratings system was opened up to true competition , and these incumbents had to actually work for their cashflow .

The mind boggles at the conflict of interest existing where ratings agencies are paid fat fees from banks to rate those very same banks latest financial offerings to the market . Pure madness .

GBH I guess you have seen this from McHugh

 

I'm going to start this report with the news that after the market closed on Friday, August 5th, 2011, Standard & Poors Rating Agency lowered the United States of America's long-term sovereign credit rating to AA+ from AAA for the first time ever. Who made S&P God? Standard & Poors should be taken over by the FBI, and everyone who had anything to do with this stupid and unjustified move should be arrested, locked up, with the key thrown away. S&P is missing the point, it is not about debts, not about economic policy, or entitlements. It is not about tax revenues or budget deficits. The key component of a AAA credit rating has to be mil itary might. The fact is, you dopes at S&P, the United States could take over the entire world militarily and confiscate all wealth if it so chose. We are moral, so the U.S. won't do that, but it could. That in itself, along with the fact the U.S. has never defaulted on bills or debts, is sufficient to keep its AAA rating. S&P has taken the criminal action of destroying the wealth of millions of innocents worldwide whose financial assets are taking a major hit in anticipation of this coming downgrade. Standard & Poors, which incestuously took fees from major corporations and then graded those same corporations' debts far higher than they were entitled to receive, which misled investors as those same corporations declared bankruptcy in 2008, that left millions of investors once again holding the bag, is now going to lower the credit rating of the United States? Really?

 

If I were the President, I would order the Secret Service, Treasury, FBI and every enforcement agency I could get my hands on tonight, and send them into S&P's corporate offices this weekend and arrest everyone in the building, lock the facility, and shut S&P down forever. This is a treasonous act against theUnited States of America, and if the President and Congress have any guts whatsoever, they should let S&P know some of this military might, a critical credit evaluation component totally ignored in their analysis. We could invade Switzerland tomorrow, take a ll their gold, and pay off all our debts - if we wanted to. We won't, but the point is we could. The widows, pensioners, orphans, families and businesses that will lose huge chunks of their investments due to this downgrade deserve our government to come to their defense against this corrupt ratings agency. What would Harry Truman do? Kennedy? Lincoln? Reagan?

 

The smart money knew this was coming. If I were in Congress, I would immediately begin an investigation into possible leaks from S&P, which very likely had an affect on stock markets this week. I'd love to know if any execs at S&P bought S&P or Treasury Note Put Options over the past few weeks. Who regulates Standard & Poors? Nobody. Any organization which yields the kind of power they have ought to be regulated.

 

By lowering the rating of the U.S., S&P has subliminally placed a disincentive on the U.S. to maintain its military might since a ton of the U.S.budget and debt comes from its military spending. Again, this credit downgrade is an attack against the defense capability of the U.S. by putting pressure on Congress to appropriate less for military defense in order to reduce debt for a rating. The S&P has placed a loaded gun at the head of U.S. policymakers who deem in their wisdom, in a dangerous worl d, that it is in the best interests of the United States to have the strongest military on earth, to do good with it, to be policeman for the world. We have been providing this service for free for years, and now that comes back to bite us because of some numbers geeks in McGraw-Hill's ivory tower who do not have a clue?

 

I hope the FBI is called to action against this threat. Congress better start hauling S&P executives onto Capitol Hill for some serious grilling.

 

Standard & Poors is a division of McGraw-Hill Companies, the publishing behemoth.      

 

You know what I would love to see? To send S&P a message of protest, to fight against their act of treason, I would love to see everyone who holds McGraw-Hill stock all sell their shares at one time Monday morning and send that company into bankruptcy as the stock drops to pennies.

 

If I was the President, I would get on television Sunday night and announce a bunch of measures against this corrupt company, and educate the American public why the U.S. is worthy of a AAA rating. What is the difference between this and any other terrorist attack? I would draw the comparison and take care of business. The Patriot Act sure gives the President the authority to get 'er done.

 

Look, our finances could be better, Fed policy could be better, tax laws could be improved, entitlements need to be addressed, but it is all workable. But for some corporation to attack the United States because it disagrees with government policy is an indictment on our constitution, our political process, our Republic and Democratic process. S&P may not like fiscal or monetary policy, but too bad, the military might is there, the American people can affect change through Democratic elections. The point of this diatribe is not to argue that things could be better in the U.S., but that S&P is dead wrong in its downgrade, a heinous violation of what is right. All so some big shots at S&P and McGraw-Hill can feel powerful.                     

 

It is this sort of crap that is going to take the world down into the Greatest Economic Depression of all time. That appears to be starting now, six months to a year early.

 

Actually , I don't even know who McHugh , is ......... but he/she has a very forthright manner , no holding back there ....... ex-military person ?...  All the  guns were blazing at S&P ......

Runs an investor/investment letter

 

www.technicalindicatorindex.com

$US 199 for a 12 month subscription to McHugh  ! ....... Heck , I can tune in here , and get  the benefit of Bernard Hickey's prognostications for free ......

...... hang on a tick , .... will see if I can find where I  left the credit card ......

Same feeling in other links...

Krugman and NakedCapitalist .....

Sorry about the Manilow GBH - should have realised you were into his earlier stuff.

 

and Bloomberg

"French, British and Russian officials expressed confidence in the U.S. after the world’s largest economy had its debt downgraded.

“France has total confidence in the solidity of the American economy and in its fundamentals,” Finance Minister Francois Baroin said in a statement to Agence France-Presse. U.K. Business Secretary Vince Cable said the dollar is “the key international currency” in the short run. Russia said it won’t review its U.S. investment policy."

The French revere Jerry Lewis ( remember him , and Dino Martini ? ) as a comic genius ....

...... clearly the judgement of the French nation is grossly impaired .......

le  Presidente' ,   Nicolas Sarkozy , wears  Elton John's old 12 inch platform shoes ........

......... Trust a toad , but never a frog !

T'was always so.... but if push came to shove I'd become Eurasian over American...

Heart before common sense maybe (maybe).  Never quite sure where this leaves the Australasians though...

 

If push comes to shove , I'd rather be me than a Eurasian or an American ...

.... as for those " Australasians " , basically , either you're a bad tempered racist , sitting atop a pile of mineral wealth , ... or you're a New Zealander ......

....sitting atop a pile of....  oh well, fingers crossed then.... E Ihowa Atua...... (still a small voice)....     Bon Soir Mr Bear.

Bonsoir , mon ami .

http://gregpytel.blogspot.com/2011/08/irrational-exuberance-two-double.html

 

It is a rather unorthodox way of solving debt problems by taking on yet more debt. It is even more unorthodox if the servicing of the existing debts is impossible without taking such additional debt. This is a classic example of a downward debt spiral: sliding into bankruptcy. Yet this is exactly what the US, as well as Britain and many countries in the Eurozone are doing.

What the solution is for the US now, the debt limit increase of another $2.1 trillion on top of the existing $14.3 trillion, will come back later to haunt the world markets: the US will have to continue to borrow to meet their financial obligations. Unless and until the US produces a balanced budget, the problem will keep growing. And they better do it soon as such balance has to be sustained on average through ups and downs of the economic cycles in a long term. This, in fact, was a golden rule that Gordon Brown preached but was never able to put it in practice. US talk of a $2 trillion (or even $4 trillion) debt reduction over 10 years is farcical at best.

 

However once the market returns to its senses, i.e. that the US debt is debt not cash and may not be repaid, its entire value will have to be subtracted from the means of debt settlement AND added to the liabilities of the bubble formula. The effect of subtracting the US debt from the bottom of the bubble ratio and adding it to the top will be the first part of the double whammy. The scale of the financial bubble will be seen instantly. This will have an immediate effect on any dollar denominated transactions and capital and is very likely to lead to a huge credit crunch.

http://www.telegraph.co.uk/finance/financialcrisis/8685968/China-attacks...

 

 

China, America's largest creditor, said it had every right to demand the nation address its structural debt problems and ensure the safety of the $1.2 trillion of US debt that it holds.

It warned that the rating cut would be followed by more "devastating credit rating cuts" and global financial turbulence if the US fails to learn to "live within its means".

"The US government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone," China said in a commentary carried by the Xinhua News Agency.

Their rating should be 'D', as should ours, because they will never pay back the debt.