S&P puts a warning shot over the US Gov't bow.

[jbnwc]

If you watch the markets or politics, you heard about this Monday. I think it's about time someone slapped these politicians with some reality. I've been telling my colleagues in China for years that we'll never pay back everything we are borrowing from them.


http://www.bloomberg.com/news/2011-04-19/s-p-tells-biggest-debtor-don-t-blow-final-act-commentary-by-caroline-baum.html


Here's the real warning:

"As with earlier downgrades to companies about to go under, S&P may already be late."

[GaribaldiCU]

The truly scary part is the credit rating agencies are generally the last to notice and make noise. Meaning we truly are out of time.

[Snowman]

Federal Budget / Gross National Product = Percentage of Federal Tax owned by each American Citizen weather they make $1.00 or $100,000,000,000.00.

No deductions, write offs, delayed income, pre-tax income, or anything else any highly paid bean counter can come up with.

If we as Americans want this fixed, then we as Americans can pony up the taxes...

[Rhino]

Federal Budget / Gross National Product = Percentage of Federal Tax owned by each American Citizen weather they make $1.00 or $100,000,000,000.00.

No deductions, write offs, delayed income, pre-tax income, or anything else any highly paid bean counter can come up with.

If we as Americans want this fixed, then we as Americans can pony up the taxes...

So... $14,000,000,000,000/300,000,000 Americans is $46,666.00 per person. How about everyone pony up?

I guess there still is that pesky part about them spending about twice as much as they take in, so taxes would still have to double to cover next year...and the next year...then Obamacare kicks in, so...

It's the spending. Always has been, always will be.

Since they won't stop spending, the only possible solution is hyperinflation. If you stole every dime from "the rich" it wouldn't cover the deficit.

17098
Germany 1923 Money is cheaper than firewood.

17099
Zimbabwe 2009 This might get you a value meal if there was actually a McDonalds there.

[Snowman]

So... $14,000,000,000,000/300,000,000 Americans is $46,666.00 per person. How about everyone pony up?Yep exactly. If Americans had a real feel it in your pocket type of figure they can relate to, I guarantee you they would force cuts in the right places.

Most Americans are so out of touch with what is being spent and why that a figure like this would bring full scale revolution. (you have permission to branish your firearms now...)

Oh and the math looks more like this..
Proposed Federal Budget around 3.8 trillion divided by the estimated United States GNP at $14.265 trillion is about 27%.

Which would mean if you make $1.00 in 2011 you pay 27 cents in taxes.
if you make $10,000.00 in 2011 you pay $2,700 in taxes.
if you make $100,000.00 in 2011 you pay $27,000 in taxes.
if you make $1,000,000.00 in 2011 you pay $270,000 in taxes.
if you make $100,000,000.00 in 2011 you pay $27,000,000 in taxes.

[rforsythe]

Oh, it's a fine time to be a working-class American. This state of perpetual denial the country finds itself in is going to end in epic fashion before too long, unless something drastic happens - and by that I mean everyone has to give up something, let go of this entitlement-mentality bullshit, and realize that convenience isn't free.

Whether we're truly out of time (meaning our debt trajectory has passed the point of no return, even if we cut it now) and what that would actually mean are a point of debate everywhere, and no, China will not "own the US" if we default on our loans. But it is certainly to a point where, if real correction is still possible, massive alteration to our nation's fiscal path right now is just about the only option.

[rforsythe]

Most Americans are so out of touch with what is being spent and why that a figure like this would bring full scale revolution. (you have permission to branish your firearms now...)

Yeah well, it's been a while, we're probably due. However that will only happen as long as American Idol and Biggest Loser go off the air.

[DFab]

I'm not going to say that the financial outlook of the U.S. is good (it's far from it), but S&P is not trustworthy.

http://www.thestreet.com/story/11082535/1/sp-moodys-inflated-mbs-ratings-report.html?cm_ven_int=anchorlink

[dirkterrell]

I'm not going to say that the financial outlook of the U.S. is good (it's far from it), but S&P is not trustworthy.

http://www.thestreet.com/story/11082535/1/sp-moodys-inflated-mbs-ratings-report.html?cm_ven_int=anchorlink

I don't think there is anybody in the whole financial industry that is trustworthy. Instead of bailing them out, we should have let them detonate and put the perpetrators of such massive fraud in jail. And that includes the government "regulators".

[jbnwc]

I'm not going to say that the financial outlook of the U.S. is good (it's far from it), but S&P is not trustworthy.

http://www.thestreet.com/story/11082535/1/sp-moodys-inflated-mbs-ratings-report.html?cm_ven_int=anchorlink

No offense, but neither you, nor Maria Woehr no anything about credit rating companies, how they are paid, or how they operate.

From personal experience, I KNOW that integrity and reputation come FIRST for S&P, and I'm sure Moody's is the same. The ratings agencies know that their reputation is first and foremost.

Companies, as well as the Obama administration, can whine all they want to the credit rating agencies to try to get preferential treatment, but I know from experience that S&P doesn't give a rat's ass if a company or state needs a good credit rating to get cheap debt. If the company doesn't deserve AAA, they won't get it. Same goes for countries and states. WHEN the US gov't is not longer a AAA country, we WILL get downgraded. Those politicians need to get their act together and now.

Anyone who thinks a ratings agency could somehow be influenced by Obama, Goldman Sachs, or anyone else is kidding themselves and obviously not aware of the ratings agencies' top priorities.

[MAZIN]

Yea but everything I have read said that the S&P Probably won't downgrade the US AAA Rating. Who knows but I think we all better learn to farm be self sufficient, can anyone say depression?

[rforsythe]

News story this morning was predicting $6 gas by summer... Personally I think that may be a bit pessimistic since that's a huge jump from where we are now (and a rise of that much, that fast would seem to indicate a full on crisis in supply), but I'm thinking I might just keep the Ninja 250 a little while longer and see what happens. 60-70mpg may start to look real good.

[Zach929rr]

I recently read some numbers that estimated that if the Bush II-era tax break extensions were allowed to expire without modification, it would alleviate 75% of the projected debt.

Go Clinton-era economics.

[GaribaldiCU]

I recently read some numbers that estimated that if the Bush II-era tax break extensions were allowed to expire without modification, it would alleviate 75% of the projected debt.

Go Clinton-era economics.

The issues with those numbers is that the projections are static, meaning they assume no reduction in taxable income. In reality, government revenue has hovered at 18-19% of GDP since WWII, regardless of income tax rates.

[dirkterrell]

The issues with those numbers is that the projections are static, meaning they assume no reduction in taxable income. In reality, government revenue has hovered at 18-19% of GDP since WWII, regardless of income tax rates.

Yep, it's never risen above 20% of GDP. Peacetime, wartime, which party is in control, etc. make no difference. Even when the top rate was a ridiculous 90%, it didn't increase tax revenues. I'm sure the reasons why are not simple but I'd bet that a big one is that the motivation of the people to work drops dramatically when it reaches that level.

[Rhino]

News story this morning was predicting $6 gas by summer... Personally I think that may be a bit pessimistic since that's a huge jump from where we are now (and a rise of that much, that fast would seem to indicate a full on crisis in supply), but I'm thinking I might just keep the Ninja 250 a little while longer and see what happens. 60-70mpg may start to look real good.

You drive a diesel. I bought mine in November and it was $2.75/gallon. It's now $4. A 50% increase in less than 5 months. Just another 50% and we're at $6. Suddenly $5 looks like relief:cry:

[GaribaldiCU]

Yep, it's never risen above 20% of GDP. Peacetime, wartime, which party is in control, etc. make no difference. Even when the top rate was a ridiculous 90%, it didn't increase tax revenues. I'm sure the reasons why are not simple but I'd bet that a big one is that the motivation of the people to work drops dramatically when it reaches that level.

That's a part of it. The higher the taxes, the harder high-income earners work to reduce their taxable income. Also, employers find ways to reward those who perform in ways that don't impact their taxable income. That's why the large expense accounts and company cars have gone by the wayside over the last 30 years.

[DFab]

No offense, but neither you, nor Maria Woehr no anything about credit rating companies, how they are paid, or how they operate.

From personal experience, I KNOW that integrity and reputation come FIRST for S&P, and I'm sure Moody's is the same. The ratings agencies know that their reputation is first and foremost.

Companies, as well as the Obama administration, can whine all they want to the credit rating agencies to try to get preferential treatment, but I know from experience that S&P doesn't give a rat's ass if a company or state needs a good credit rating to get cheap debt. If the company doesn't deserve AAA, they won't get it. Same goes for countries and states. WHEN the US gov't is not longer a AAA country, we WILL get downgraded. Those politicians need to get their act together and now.

Anyone who thinks a ratings agency could somehow be influenced by Obama, Goldman Sachs, or anyone else is kidding themselves and obviously not aware of the ratings agencies' top priorities.

I KNOW exactly what the rating agencies top priority is. MAKING MONEY. That's why they were rating toxic MBS as AAA; to get paid MONEY. If they had rated them as garbage, which they should have, the asshats selling the garbage would have taken their business elsewhere.

Bloomberg1 (http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ax3vfya_Vtdo)
Bloomberg2 (http://www.bloomberg.com/apps/news?pid=newsarchive&refer=home&sid=aIzzx2vC10KI)

[rforsythe]

You drive a diesel. I bought mine in November and it was $2.75/gallon. It's now $4. A 50% increase in less than 5 months. Just another 50% and we're at $6. Suddenly $5 looks like relief:cry:

When it dipped down the last time I saved a receipt I got at 1.86/gal, figuring it was some sort of historical thing I will never see again.

[derekm]

I'm moving to Canadia*




















*Only if nickleback leaves*

[jbnwc]

I KNOW exactly what the rating agencies top priority is. MAKING MONEY. That's why they were rating toxic MBS as AAA; to get paid MONEY. If they had rated them as garbage, which they should have, the asshats selling the garbage would have taken their business elsewhere.

Bloomberg1 (http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ax3vfya_Vtdo)
Bloomberg2 (http://www.bloomberg.com/apps/news?pid=newsarchive&refer=home&sid=aIzzx2vC10KI)

Do you work for a ratings agency?

[modette99]

Time for a revolution......

[MAZIN]

I'm gonna use Rhino's motto and "vote from the roof tops!".

[DFab]

Do you work for a ratings agency?

No. I guess that means you win :( (http://en.wikipedia.org/wiki/Ad_hominem)

People that don't work for ratings agencies obviously cannot have valid opinions about their function or priorities.

I mean really, people shouldn't even be commenting in this thread unless they have at least a Masters in economics.
:roll:

[dirkterrell]

No. I guess that means you win :( (http://en.wikipedia.org/wiki/Ad_hominem)

People that don't work for ratings agencies obviously cannot have valid opinions about their function or priorities.

I mean really, people shouldn't even be commenting in this thread unless they have at least a Masters in economics.
:roll:

Agreed. Argument by authority failure. The AAA ratings these firms gave to a slew of MBS products that turned out to be junk (and maintaining those ratings months after loans were defaulting) certainly give rise to suspicion about their integrity. When the banks that sell the securities are the ones paying for the ratings, it creates an environment where fraud is too tempting. The issues may not have been systemic (i.e. it was rogue employees) but even so, that speaks to a weakness in their management structure.

[GaribaldiCU]

Agreed. Argument by authority failure. The AAA ratings these firms gave to a slew of MBS products that turned out to be junk (and maintaining those ratings months after loans were defaulting) certainly give rise to suspicion about their integrity. When the banks that sell the securities are the ones paying for the ratings, it creates an environment where fraud is too tempting. The issues may not have been systemic (i.e. it was rogue employees) but even so, that speaks to a weakness in their management structure.

Hence the old saw that the ratings agencies are the last to admit there's a problem.