The Tea Party downgrade

[svelte]

How any of the major rating agencies can pretend to have a shred of integrity anymore is beyond me. They did not see nor report the risk involved with the housing funds developed during the bubble, and now they expect us to believe they understand the risk on subject even harder to understand than that?

At least the Piggs were sounding the alarm loud and clear on housing. Maybe Piggs should be the one assessing government debt risk…

[davelj]

Debt ratings are a lagging indicator. If you follow the prices of most debt, the damage occurs well in advance of the downgrade. In the current unique set of circumstances, our economy is so weak that bond prices might actually increase from here (for a while, that is) despite our crappy fiscal situation.

The beauty of S&P’s downgrade is that both political parties have something to grab hold of. The Democrats will correctly point out that S&P is saying that the government needs more revenue (“They’re telling us to raise taxes!”). The Republicans will correctly point out that S&P is saying that the government needs to spend less (“They’re telling us we need to reduce spending!”). They’re both right.

What S&P is saying is, “We don’t care how you go about reducing the deficit – that’s a political issue – but you’ve gotta materially reduce the gap between the inflows and the outflows. We’re indifferent as to how you do it; again, that’s a political issue. But until you figure it out, we’re going to downgrade you and put you on negative watch.” Regardless of how you feel about S&P’s recent (large) gaffes, this is a pretty reasonable position to take… some might even say generous given the circumstances.

[davelj]

Debt ratings are a lagging indicator. If you follow the prices of most debt, the damage occurs well in advance of the downgrade. In the current unique set of circumstances, our economy is so weak that bond prices might actually increase from here (for a while, that is) despite our crappy fiscal situation.

The beauty of S&P’s downgrade is that both political parties have something to grab hold of. The Democrats will correctly point out that S&P is saying that the government needs more revenue (“They’re telling us to raise taxes!”). The Republicans will correctly point out that S&P is saying that the government needs to spend less (“They’re telling us we need to reduce spending!”). They’re both right.

What S&P is saying is, “We don’t care how you go about reducing the deficit – that’s a political issue – but you’ve gotta materially reduce the gap between the inflows and the outflows. We’re indifferent as to how you do it; again, that’s a political issue. But until you figure it out, we’re going to downgrade you and put you on negative watch.” Regardless of how you feel about S&P’s recent (large) gaffes, this is a pretty reasonable position to take… some might even say generous given the circumstances.

[davelj]

Debt ratings are a lagging indicator. If you follow the prices of most debt, the damage occurs well in advance of the downgrade. In the current unique set of circumstances, our economy is so weak that bond prices might actually increase from here (for a while, that is) despite our crappy fiscal situation.

The beauty of S&P’s downgrade is that both political parties have something to grab hold of. The Democrats will correctly point out that S&P is saying that the government needs more revenue (“They’re telling us to raise taxes!”). The Republicans will correctly point out that S&P is saying that the government needs to spend less (“They’re telling us we need to reduce spending!”). They’re both right.

What S&P is saying is, “We don’t care how you go about reducing the deficit – that’s a political issue – but you’ve gotta materially reduce the gap between the inflows and the outflows. We’re indifferent as to how you do it; again, that’s a political issue. But until you figure it out, we’re going to downgrade you and put you on negative watch.” Regardless of how you feel about S&P’s recent (large) gaffes, this is a pretty reasonable position to take… some might even say generous given the circumstances.

[davelj]

Debt ratings are a lagging indicator. If you follow the prices of most debt, the damage occurs well in advance of the downgrade. In the current unique set of circumstances, our economy is so weak that bond prices might actually increase from here (for a while, that is) despite our crappy fiscal situation.

The beauty of S&P’s downgrade is that both political parties have something to grab hold of. The Democrats will correctly point out that S&P is saying that the government needs more revenue (“They’re telling us to raise taxes!”). The Republicans will correctly point out that S&P is saying that the government needs to spend less (“They’re telling us we need to reduce spending!”). They’re both right.

What S&P is saying is, “We don’t care how you go about reducing the deficit – that’s a political issue – but you’ve gotta materially reduce the gap between the inflows and the outflows. We’re indifferent as to how you do it; again, that’s a political issue. But until you figure it out, we’re going to downgrade you and put you on negative watch.” Regardless of how you feel about S&P’s recent (large) gaffes, this is a pretty reasonable position to take… some might even say generous given the circumstances.

[davelj]

Debt ratings are a lagging indicator. If you follow the prices of most debt, the damage occurs well in advance of the downgrade. In the current unique set of circumstances, our economy is so weak that bond prices might actually increase from here (for a while, that is) despite our crappy fiscal situation.

The beauty of S&P’s downgrade is that both political parties have something to grab hold of. The Democrats will correctly point out that S&P is saying that the government needs more revenue (“They’re telling us to raise taxes!”). The Republicans will correctly point out that S&P is saying that the government needs to spend less (“They’re telling us we need to reduce spending!”). They’re both right.

What S&P is saying is, “We don’t care how you go about reducing the deficit – that’s a political issue – but you’ve gotta materially reduce the gap between the inflows and the outflows. We’re indifferent as to how you do it; again, that’s a political issue. But until you figure it out, we’re going to downgrade you and put you on negative watch.” Regardless of how you feel about S&P’s recent (large) gaffes, this is a pretty reasonable position to take… some might even say generous given the circumstances.

[ocrenter]

While tea party’s inability to compromise did make them the party of blame (and if you believe polls they have suffered quite a bit of set back), I seriously doubt “the $4 trillion grand bargain” obama put on the table would even be mentioned if voters did not turn the house republican with a lot of tea party backing.

[ocrenter]

While tea party’s inability to compromise did make them the party of blame (and if you believe polls they have suffered quite a bit of set back), I seriously doubt “the $4 trillion grand bargain” obama put on the table would even be mentioned if voters did not turn the house republican with a lot of tea party backing.

[ocrenter]

While tea party’s inability to compromise did make them the party of blame (and if you believe polls they have suffered quite a bit of set back), I seriously doubt “the $4 trillion grand bargain” obama put on the table would even be mentioned if voters did not turn the house republican with a lot of tea party backing.

[ocrenter]

While tea party’s inability to compromise did make them the party of blame (and if you believe polls they have suffered quite a bit of set back), I seriously doubt “the $4 trillion grand bargain” obama put on the table would even be mentioned if voters did not turn the house republican with a lot of tea party backing.

[ocrenter]

While tea party’s inability to compromise did make them the party of blame (and if you believe polls they have suffered quite a bit of set back), I seriously doubt “the $4 trillion grand bargain” obama put on the table would even be mentioned if voters did not turn the house republican with a lot of tea party backing.

[Arraya]

Yeah Dave, I’m sure that S&P is full of people really trying to give their best analysis of risk unaffected by politics or money. Like a loving parent that enabled some bad habits before and is just trying to redeem herself with some tough love, right. haha

Of course, partisan politics being what it is these days — a blood-soaked ditch of snarling hyenas gaming for control of the insane asylum. This is a straight-up political hit-job(with a possible side benefit of goosing equities).

[Arraya]

Yeah Dave, I’m sure that S&P is full of people really trying to give their best analysis of risk unaffected by politics or money. Like a loving parent that enabled some bad habits before and is just trying to redeem herself with some tough love, right. haha

Of course, partisan politics being what it is these days — a blood-soaked ditch of snarling hyenas gaming for control of the insane asylum. This is a straight-up political hit-job(with a possible side benefit of goosing equities).

[Arraya]

Yeah Dave, I’m sure that S&P is full of people really trying to give their best analysis of risk unaffected by politics or money. Like a loving parent that enabled some bad habits before and is just trying to redeem herself with some tough love, right. haha

Of course, partisan politics being what it is these days — a blood-soaked ditch of snarling hyenas gaming for control of the insane asylum. This is a straight-up political hit-job(with a possible side benefit of goosing equities).

[Arraya]

Yeah Dave, I’m sure that S&P is full of people really trying to give their best analysis of risk unaffected by politics or money. Like a loving parent that enabled some bad habits before and is just trying to redeem herself with some tough love, right. haha

Of course, partisan politics being what it is these days — a blood-soaked ditch of snarling hyenas gaming for control of the insane asylum. This is a straight-up political hit-job(with a possible side benefit of goosing equities).

[Author]

Posts