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S&P's $2 Trillion Math Mistake

CmdrTaco posted more than 3 years ago | from the show-your-work dept.

Government 1040

Last friday Moody's S&P announced that they had downgraded the U.S.'s credit rating (leading to a pretty huge discussion on Slashdot I might add). Since then more interesting news has come out, suraj.sun writes "In a document provided to Treasury on Friday afternoon, Standard and Poor's (S&P) presented a judgment about the credit rating of the U.S. that was based on a $2 trillion mistake. After Treasury pointed out this error — a basic math error of significant consequence — S&P still chose to proceed with their flawed judgment by simply changing their principal rationale for their credit rating decision from an economic one to a political one. S&P incorrectly added that same $2.1 trillion in deficit reduction to an entirely different baseline where discretionary funding levels grow with nominal GDP over the next 10 years. Relative to this alternative baseline, the Budget Control Act will save more than $4 trillion over ten years — or over $2 trillion more than S&P calculated. S&P acknowledged this error — in private conversations with Treasury on Friday afternoon and then publicly early Saturday morning. In the interim, they chose to issue a downgrade of the U.S. credit rating."

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When ideology surpasses basic mathematics (1)

cultiv8 (1660093) | more than 3 years ago | (#37020890)

We have huge discussions on Slashdot I might add

Re:When ideology surpasses basic mathematics (2)

Anonymous Coward | more than 3 years ago | (#37020978)

Hmmm, As I read the agreement - all the 'Savings' are not reductions in actual spending - just a promise not to overspend as much. Hardly a basis for sound debt reduction.

Re:When ideology surpasses basic mathematics (5, Insightful)

Hijacked Public (999535) | more than 3 years ago | (#37021006)

It isn't basic math, or any math at all, really. Despite massive quantities of data analysis and some of the most mind bending graphs ever devised, plain old emotion still rules most financial markets and most certainly rules things like applying "AAA" versus "AA+" to some piece of paper.

These people everyone is amped up about changing the US' rating are the same people who entirely failed to foresee the biggest economic collapse most of us have ever lived through. They were handing out AAA ratings, to mortgage backed securities that no one other the guy who invented them could even understand, just a few months before they became almost completely worthless. The fact that anyone still trusts S&P and their ilk is illustrative of the fact that emotion rules this game. They've proven with math that they know no more than anyone else.

Re:entirely failed to foresee - economic collapse (1)

TaoPhoenix (980487) | more than 3 years ago | (#37021220)

"Some of the activities they undertook contributed to the prevailing mood of the time!"

Did they entirely fail to see it coming? "Well, they're not so sure about that...".

Go Gregory Brothers!

http://www.youtube.com/watch?v=-fTh2GffJsM [youtube.com]

Re:When ideology surpasses basic mathematics (5, Interesting)

Anonymous Coward | more than 3 years ago | (#37021142)

Not to be silly or anything but it deserves to be downgraded.

AAA is supposed to be rock freaking solid. You do not worry about it.

This up to the wire biting your fingernails crap is *NOT* AAA material. If you saw the last 3 budget rounds being this sort of fiasco (which it was) would you want to invest in it?

If you have to worry about it then it is not AAA material. It is still 'good' credit. But something you need to keep an eye on so AA+.

The rating system was subjective in the first place. As seen by the AAA ratings they were giving out to 'too big to fail' institutions right before they failed. In many ways s&p helped create the very mess they are downgrading the US gov for. As the US gov covered their bets...

slashdot mouthpiece for conservatives (-1)

Anonymous Coward | more than 3 years ago | (#37020892)

can we go back to geek news please?

Re:slashdot mouthpiece for conservatives (-1)

Anonymous Coward | more than 3 years ago | (#37021040)

Nah, we need our daily "Please flame each other" topic to keep flames lower in other threads.

Pack of LIES (3, Insightful)

Anonymous Coward | more than 3 years ago | (#37020898)

More lies...the debt will INCREASE by almost 8 trillion over the next 10 years. And probably more than that I can guarantee you! The S&P should have downgraded us a loooonnnggggg time ago.

And sorry it is no ones fault but ours.

Re:Pack of LIES (0)

Anonymous Coward | more than 3 years ago | (#37020924)

You mean all of the politicians that refused to cut spending and tax the rich....

Re:Pack of LIES (2, Informative)

Anonymous Coward | more than 3 years ago | (#37021052)

You do realize you could take every dollar of taxable (that is AGI) of everyone earning $75,000 or more (in 2006 tax role numbers) and barely cover the $4 trillion budget?? Is that what you want? Is that "fair and equitable"? I feel like I am LIVING in Atlast Shrugged. Ayn Rand is writing reality now from heaven.

I did notice you mentioned spending cuts...the only real answer to this problem. A hard answer, but sorry the only real one. ALL government activities need to be cut to tax receipts. Period. If our tax receipts are $2.8 trillion, then that's it. If granny needs to take a haircut on her SS check or can't get a new hip, too bad. Sorry. Your generation (and your kids, I'm a grandkid at this point) spent all of the money you put in, the money I'VE put in, and maybe even my kids. You're on to MY grandkids now.

Its terrible I agree, but it is what it is. CUT THIS STINKING GOVT TO THE BONE!

Re:Pack of LIES (1)

Anonymous Coward | more than 3 years ago | (#37021122)

We are not supposed to demonstrate logical arguments in this thread.

Re:Pack of LIES (1)

Anonymous Coward | more than 3 years ago | (#37021154)

While I don't disagree that spending must be cut, the problem with the majority of people and politicians who talk about spending cuts never seem to include military spending. Funny, that.

Re:Pack of LIES (-1)

Anonymous Coward | more than 3 years ago | (#37021102)

Pretty much all politicians are ready to cut spending (only on different things), but only half of them refuse to tax the rich. This is what a conservative+tea party love fest looks like. If they continue to "win" you can look forward to a debt of 110% of GBP and "AA" within two years. Somewhere around 130% of GDP is where I think investors will flip their sign and say, hey, if I'm going to borrow to you, how about you pay a decent interest rate? That is when the real pain-ride begin and all these nice "linear" predictions go out of the window.

And saying this downgrade is wrong because of some math error... no it's not wrong. It's fucking LATE. US politicians have been getting signal after signal, but they refuse to do any real hard cutting (increased taxes, cut military spending, not starting wars). Maybe if there where always a large group of critters who were going out and couldn't be re-elected, things would work, but as long as everyone is fighting for his and her personal gravy train, this will continue.

Re:Pack of LIES (3, Insightful)

Joce640k (829181) | more than 3 years ago | (#37021194)

It's not "the rich" who caused the problem. Asking "the rich" to pay more doesn't really address the root cause and will only be a band-aid on the sucking chest wound that is the economy.

The people who should pay up are the ones who got a trillion dollar taxpayer bailout and are now busy awarding themselves billion dollar bonuses for doing such a great job bankrupting the economy.

Then after they've paid up ... boot the parasitic bastards out of the system.

in other news (0)

Anonymous Coward | more than 3 years ago | (#37021140)

S&P facilities around the globe go dark, employees turn up missing, computer connections

I can't fault them for doing so.. (0)

Anonymous Coward | more than 3 years ago | (#37020906)

Our political situation is horrible, and shows no signs of becoming better. The Tea Party dominates the GOP, and the Democratic president folds faster than a house of cards whenever they do something stupid.

lol (0)

Anonymous Coward | more than 3 years ago | (#37020908)

lol. Watching people flail around with excuses for why the credit rating shouldn't have been downgraded remind me of the people you see on those shows where they've maxed out dozens of credit cards yet still try to act like they aren't bankrupt and doing fine. Your country is insolvent. Get over it. Yes, you can no longer say "AMERICA FUCK YEAH!" since you don't have a AAA rating, but most countries in the world don't and most of them do just fine.

Re:lol (1)

vawwyakr (1992390) | more than 3 years ago | (#37021050)

The thing is most of the countries that do still have a AAA rating have a higher debt as % of GDP and higher debt per capita than the US does. I think the whole world (except China, and a few others) are in trouble if the US is considered to be in trouble.

doesn't make much of a difference (5, Interesting)

lambent (234167) | more than 3 years ago | (#37020920)

regardless of the math, S&P's reasoning is sound. let's not try to find scapegoats, please. the U.S. is hurtling at full speed towards a deficit meltdown, and quibbling over S&P's math doesn't change the fact that the country needs to come to terms with it ASAP.

Re:doesn't make much of a difference (3, Insightful)

Anonymous Coward | more than 3 years ago | (#37021056)

No, you see... the point here isn't to make a well-reasoned argument, rather they are trying to link the 'error in calculation' to somehow mean the S&P downgrade is faulty.

IIRC, the 'math mistake' they did was assuming that the Bush tax cuts wouldn't expire... Which seems like a rather obvious thing to happen considering there's certain elected people who'd rather let the US default than lose the next election.

Re:doesn't make much of a difference (2, Insightful)

Snarky McButtface (1542357) | more than 3 years ago | (#37021062)

I find it difficult to believe their reasoning is sound. The other two ratings agencies, Moodys and Fitch, have no plans to downgrade US debt. Standards and Poors also gave AIG and Lehman Brothers AAA credit ratings up til they crashed and burned. Then there were the mortgage backed derivatives issued the same AAA rating by S&P. The United States does have some serious long term budget problems but the credit downgrade is just political posturing.

Re:doesn't make much of a difference (4, Informative)

Desler (1608317) | more than 3 years ago | (#37021166)

The other two ratings agencies, Moodys and Fitch, have no plans to downgrade US debt.

I wouldn't be so sure about that... [reuters.com] :

Ratings agency Moody's repeated a warning on Monday it could downgrade the United States before 2013 if the fiscal or economic outlook weakens significantly

Re:doesn't make much of a difference (0)

Anonymous Coward | more than 3 years ago | (#37021252)

The reason Moody's haven't just done the downgrade already is that if 'two' rating agencies did so, then the world economy would go down the drain as US bonds would be sold off by lots of pension investment funds, and such.

Basically the ratings agencies are telling the US government to get things fucking sorted, and S&P was the sacrificial lamb chosen to send the message. Do not doubt for a moment that the rating agencies haven't planned this out.

Re:doesn't make much of a difference (5, Insightful)

nstlgc (945418) | more than 3 years ago | (#37021202)

How can you in one sentence admit that "the US does have some serious long term budget problems" AND claim that getting anything less than the highest possible rating would be "political posturing" ?

Buffett appears to feel the same way (3, Insightful)

Sycraft-fu (314770) | more than 3 years ago | (#37021240)

He says the government's performance is sure not AAA, but he'd rate the debt as AAA.

Remember: Ratings on bonds is supposed to be how likely they are to default. Nothing has changed that makes the US more likely to default.

http://www.cnbc.com/id/44056326 [cnbc.com]

Re:doesn't make much of a difference (0)

Anonymous Coward | more than 3 years ago | (#37021170)

Lambent is absolutely correct. It is time for the world and our citizens to cut off the flow of funds to our wasteful government. Both parties use those funds to buy votes. They will run this country and our people into the ground if they are not stopped.

Re:doesn't make much of a difference (2, Insightful)

Colonel Korn (1258968) | more than 3 years ago | (#37021188)

regardless of the math, S&P's reasoning is sound. let's not try to find scapegoats, please. the U.S. is hurtling at full speed towards a deficit meltdown, and quibbling over S&P's math doesn't change the fact that the country needs to come to terms with it ASAP.

I do not think that words means what you think it means.

Even if their conclusion is correct, their reasoning isn't anything close to sound. "Oh, the justification for our action was off by about 20%? That's okay, we'll just support the same conclusion and justify it with our gut feeling about politics," isn't reasoning at all. It seems to me that sound reasoning would be quantitatively comparing default likelihoods between the US government and other AAA-rated securities and then adjusting accordingly.

What they did is like killing a chicken, looking at its entrails, and then declaring that because of the intestines, they are confident that 2 + 2 = 4.

Re:doesn't make much of a difference (0)

Anonymous Coward | more than 3 years ago | (#37021224)

If you are that certain, could you point to the exact moment in time when the U.S will default and implode?

Re:doesn't make much of a difference (1)

Binestar (28861) | more than 3 years ago | (#37021250)

The US is almost but not quite at record highs on debt as a percentage of GDP. We were at this point previously right at the end of WWII. At the end of WWII we had the Marshall Plan, which allowed us to get out of that debt load. I don't see us gaining that much helping rebuild the countries of Iraq, Afganistan and Lybia. So we've been here before, but the method we used to get out of this situation isn't going to work here.

Still an unsustainable deficit (5, Insightful)

goldspider (445116) | more than 3 years ago | (#37020926)

Somebody correct me if I'm wrong, but at current spending levels, cutting $4T over 10 years still has us running a deficit. Considering that this deal was politically the best we could do, it's easy to agree with S&P's pessimistic view of our political budget woes.

Re:Still an unsustainable deficit (0)

Anonymous Coward | more than 3 years ago | (#37021242)

Running a deficit and running an unsustainable deficit are two different things. 90% of GDP has been a historical tipping point for many countries debt, so getting the debt below 90% would be the healthy thing to do. Borrowing and spending is a sign of investment and expansion, so a zero debt government would probably not be that great for the economy. NPR's Planet Money has done a bunch of great podcasts on the subject.
http://www.npr.org/blogs/money/2011/07/20/138518262/the-tuesday-podcast-how-much-debt-is-too-much

Moody's is not S&P (0)

Anonymous Coward | more than 3 years ago | (#37020942)

Moody's and S&P are two different rating agencies.

Re:Moody's is not S&P (1)

Desler (1608317) | more than 3 years ago | (#37020974)

And of note, Moody's still gives the US Government it's highest Aaa rating.

Re:Moody's is not S&P (0)

Anonymous Coward | more than 3 years ago | (#37021034)

Until now [reuters.com] .

Re:Moody's is not S&P (1)

Desler (1608317) | more than 3 years ago | (#37021058)

Moody's hasn't dropped the rating. They have, though, warned sternly that they will if things don't look better which is what that story is saying.

Re:Moody's is not S&P (3, Interesting)

smelch (1988698) | more than 3 years ago | (#37021168)

I wonder which agency carries the most weight though. I suspect it is S&P, though I'm not sure.

We have a huge cultural problem. Most people don't care about any of the important things. Of the people who care, fewer still are educated. Of the people that are educated, many are polarized in to incompatible philosophies. This is leading to paralysis. I hate to say it, but more and more the idea of dividing the union just makes more sense. The belief that the Federal government should be doing all that it does makes the US too big and too diverse to govern in a reasonable way.

I don't mean any of this in a doom and gloom kind of way, just saying I think it makes a lot more sense. Everybody knows the US is majorly divided on how we should do just about everything, largely based on geography.

This reminds me of the Cold War... (4, Insightful)

Cornwallis (1188489) | more than 3 years ago | (#37020946)

There was a time when people worried about who had the largest nuclear arsenal.

This kinda reminds me of that "1000 vs 10,000" nuclear weapons discussion. Everybody is dead after 1000 bombs go off. It isn't like 10,000 bombs are going to kill you that much more.

The point being the economy is still going down the tubes...

Re:This reminds me of the Cold War... (0)

Anonymous Coward | more than 3 years ago | (#37021032)

It's time to start printing green cards instead of dollars; bring more tax payers in.

Re:This reminds me of the Cold War... (2)

royallthefourth (1564389) | more than 3 years ago | (#37021208)

Bring Mexicans in just to tax them? I've got a better idea.
Tax the rich.

Their crappy math got us here in the first place. (5, Insightful)

Anonymous Coward | more than 3 years ago | (#37020956)

It was S&Ps rating system that the banks gamed with repackaged mortgages in the first place. Fuck um.

How long before the media points that out? Think they will?

Mortgage Backed Securites (5, Interesting)

Tteddo (543485) | more than 3 years ago | (#37020958)

Yeah, these are the same people that gave mortgage backed securities a AAA rating right up until it was blindingly obvious that they were wrong.

Re:Mortgage Backed Securites (2, Informative)

Lifyre (960576) | more than 3 years ago | (#37021132)

My only comment to this is hindsight is 20/20. The problem with statements like this is that they very obviously weren't at the time. Not just from the rating agency's point of view but many economists were feeling the same way. There were a few economists who cautioned against them and had them correctly evaluated but they were far from the majority and even then most of their opinions were hedged with speculative language.

Re:Mortgage Backed Securites (1)

jeffmeden (135043) | more than 3 years ago | (#37021246)

My only comment to this is hindsight is 20/20. The problem with statements like this is that they very obviously weren't at the time. Not just from the rating agency's point of view but many economists were feeling the same way. There were a few economists who cautioned against them and had them correctly evaluated but they were far from the majority and even then most of their opinions were hedged with speculative language.

It sure is a good thing our national finance system operates on majority rule... We should just hold a vote that asks "who thinks foreign governments really have a valid claim on ~10 trillion in US government liability?" That will settle this once and for all.

Re:Mortgage Backed Securites (1)

andy1307 (656570) | more than 3 years ago | (#37021256)

So if they say US gov't debt is AA, going by S&P's track record, it's actually C?

Honey they cancelled the creditcard (1)

Anonymous Coward | more than 3 years ago | (#37020960)

Their math was wrong, but they said too bad, we will cancel it anyways just because our debt is too high.

Fix your damn over spending! The rest of the world has too!

Re:Honey they cancelled the creditcard (1)

iceaxe (18903) | more than 3 years ago | (#37021156)

The rest of the world has too!

Citation, please. I am skeptical of this statement.

Re:Honey they cancelled the creditcard (1)

jeffmeden (135043) | more than 3 years ago | (#37021260)

The rest of the world has too!

Citation, please. I am skeptical of this statement.

He meant "has to!" but mistyped it...

Too good credit rating anyway (1)

luvirini (753157) | more than 3 years ago | (#37020966)

The total debt US has is way too high anyway, if a person had same sort of debt load they would be insolvent.

US is ofcourse not alone in the list of countries where the debt is too high, and still many of those other countires have high credit ratings too.

And yes credit rating companies are bad at basic math skills as expected by their previous ratings, but that does not mean that US should have any credit raiting above "Do not lend money at any cost"

Re:Too good credit rating anyway (1, Insightful)

IWannaBeAnAC (653701) | more than 3 years ago | (#37021054)

The total debt US has is way too high anyway, if a person had same sort of debt load they would be insolvent.

That is a pretty astounding thing to say. Most people who have a mortgage have a far higher debt load than the US government, and sub-prime victims excepted, the vast majority of home-owners do not go insolvent in the process.

Re:Too good credit rating anyway (1)

luvirini (753157) | more than 3 years ago | (#37021130)

In a sane banking environment they get loan amount that maxes out at lower than the expected easy resale value of the home.

It is when markets go overheated that people get too high loan amounts compared to what the homes would sell for when times are bad and they often do go insolvent if they lose their income while there is a market disruption.

What easily sellable assets does US goverment have to cover their debts if suddenly there was no further loans incoming? I know they have a lot of assets, some are even resesable, but in such a bust situation, how likely are they to be able to raise the money to pay off all the loans without davaluating the whole currency massively by "printing money"?

Re:Too good credit rating anyway (4, Insightful)

Arlet (29997) | more than 3 years ago | (#37021148)

But then again, most mortgage owners have a reasonable plan to get out of debt in a certain time. For instance, my mortgage will be fully paid off in 15 years, and even assuming I default before that, the bank can sell the house and get their money back, so it won't disrupt anything else.

Can the US government claim the same ?

Re:Too good credit rating anyway (1)

RKThoadan (89437) | more than 3 years ago | (#37021088)

And yet if a business ran the same levels of debt it would generally be considered to not be borrowing enough! The govt is running a debt-to-income ratio of right around 1 to 1. For every dollar they make in income they borrow 1 more. Most companies run somewhere in the 2-1 or 10-1 range, with several going much higher.

http://www.usatoday.com/news/opinion/forum/2011-05-24-Dont-believe-national-debt-hype_n.htm [usatoday.com]

Re:Too good credit rating anyway (1)

nedlohs (1335013) | more than 3 years ago | (#37021104)

The US clearly isn't insolvent, given it isn't missing payments on its debts.

Even accounting insolvency, the Federal Government owns over 600,000,000 acres of land in the US. The book value of that is at least an order of magnitude larger than the government's debts. Oh and it has powers of imminent domain, how much book value do you give those?

Are you seriously claiming I would be insolvent is I hadn't missed a single payment of my debts in the last 30 years, and I currently have a total debt load (including the mortgage) of 10% of the current market value of my home? The government is in a better solvency position than that.

Re:Too good credit rating anyway (2)

Arlet (29997) | more than 3 years ago | (#37021232)

According to Bill Gross, the total US liabilities add up to about $60 trillion. At an average price of $5000/acre, the 600 million acres only add up to $3 trillion. That's not an order of magnitude more.

Re:Too good credit rating anyway (0)

Anonymous Coward | more than 3 years ago | (#37021178)

Insolvent, yes. Impossible to repay, no. Just how many people have a mortgage on their home? Does that mortgage exceed your gross annual salary? If so, you have a higher debt load than the US Government. Are you able to make your payments and save money? If so, then the government needs to start running a "surplus" until the debt is gone, then create a wealth fund for hard times or war. $500B to $1T wouldn't be too bad for a rainy day fund when it's at this scale. Warren Buffet had a great idea for a balanced budget law - If the deficit for any year exceeds 3% of GDP, the entire Congress is ineligible for re-election. He claims that would fix the deficit in 5 minutes :)

The public needs to educate congress on fiscal responsibility. It's not too hard.

Re:Too good credit rating anyway (1)

smelch (1988698) | more than 3 years ago | (#37021190)

The US doesn't even have the same debt ratio as an individual with a decent sized mortgage and a few credit cards, but they have a way better interest rate.

Political (5, Interesting)

jbolden (176878) | more than 3 years ago | (#37020968)

S&P in their report had essentially 2 issues:

a) They had questions about the budget strategy over the medium term.
b) They believed that political risk in the United States had increased substantially.

Given that we had 50+ US congressmen arguing that a sovereign default was either no big deal or desirable I can't see how one can disagree with (b). Political risk has substantially increased.

(a) is more questionable. The US economy is very large and the US ultimately does own a printing press. But the United States because of political divisions is simply unwilling to engage in the actions required to end high unemployment nor willing to reduce the government to the size needed if we intend to maintain a much lower labor participation rate than we had been.

So I can see both sides for (a), but (b) is the big factor. I think the Obama administration in trying to attack S&P based on secret conversations is simply failing to address the depth of the real problem. Whether their story is true or not, S&P is not wrong to notify investors that treasuries have risks they did not have 5 years ago.

Re:Political (4, Insightful)

SwedishChef (69313) | more than 3 years ago | (#37021014)

You're right... it's just too bad that S&P didn't warn investors about the even greater risks involved in bundling questionable home loans and calling the result "investments".

Re:Political (1)

arth1 (260657) | more than 3 years ago | (#37021114)

The US economy is very large and the US ultimately does own a printing press.

Yes, the US economy is large, but so are the accumulated deficits and planned deficits. To "weather off" the effects of the increased load every year, the US economy would have to grow more than eight percent per year. That isn't going to happen.
As for owning a printing press, the Federal Reserve is half-private. Yes, only in the US....

Re:Political (2)

Attila Dimedici (1036002) | more than 3 years ago | (#37021184)

We had few if any congressmen arguing that a sovereign default was "no big deal". We had quite a few arguing that a failure to raise the debt ceiling was no big deal. Their argument was that even if the debt ceiling was not raised, the U.S. government would not need to default.
The fact is that treasuries do not have risks they did not have 5 years ago, those risks are just 5 years closer now (and at this point, it is becoming clear that those risks are even closer than estimates put them 5 years ago). It appears that the U.S. has about 5 years to get its fiscal house in order. If it fails to do so in that time frame, it is probable that the world economy will go into a severe disruption that will make the Great Depression look like a wonderful time.

Re:Political (0)

Anonymous Coward | more than 3 years ago | (#37021266)

Yep, let's just monetize the debt some more. What's the worst that could happen? After all, stagflation isn't that bad, right?

Or, let's just make inflation soar so much that the U.S. debt is equal to buying a new lamborghini. It's not like that would hurt us, right?

help me (-1)

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Re:help me (-1)

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How about if instead I just ram my big black throbbing dick up that tight spic fuck hole and give you the best deep dicking of your life?

Economic risk vs. Political risk (0)

Anonymous Coward | more than 3 years ago | (#37020992)

The credit rating of a sovereign's debt issued in its own currency is always based on political risk, never economic risk. The country can always create the money needed to pay the bills. In contrast, eurozone countries that don't have their own currency have a very real economic risk.

To Read or Not to Read, That is the Question (0)

poena.dare (306891) | more than 3 years ago | (#37020994)

I'd like to see some aggregate comment stats on the front page next to each story:

Anon Cow posts/Total posts*100.
Troll Mods/Total Mods*100

Some comment threads aren't worth reading simply because there is too much noise or flames. (Even with filters and the like.)

Re:To Read or Not to Read, That is the Question (0)

Anonymous Coward | more than 3 years ago | (#37021126)

Not a bad idea, but I'd probably base it on positive rather than negative modifiers. It's easy enough to hide AC/Troll posts in your settings but it would be nice to see at a glance which threads were generating lots of positive informative/insightful comments.

Retaliation (0)

DNS-and-BIND (461968) | more than 3 years ago | (#37021000)

This move had zero to do with economics, and everything to do with getting revenge on the teabaggers. Gonna block Obama? We're going to downgrade your credit rating, math be damned. These fuckwits have to be taught that their actions have consequences. Government is here to help, not harm. Taxes are good, not bad. Hopefully the FBI will move in soon and start busting teabaggers for terrorism - we can only hope.

Re:Retaliation (3, Interesting)

iceaxe (18903) | more than 3 years ago | (#37021238)

You seem to be implying that S&P is secretly acting on behalf of the Democratic Party in support of President Obama's re-election campaign, which I find to be an interesting point of view.

The rest is even more confusing.

Separate agencies (1)

RicardoGCE (1173519) | more than 3 years ago | (#37021002)

Taco,

If you can't tell Moody's from S&P, you probably shouldn't be commenting on the issue.

Moody's still rates the US as AAA, as does Fitch.

Re:Separate agencies (1)

Desler (1608317) | more than 3 years ago | (#37021022)

Nitpick: Moody's doesn't have a "AAA" rating. There top rating is "Aaa".

Case (0)

Anonymous Coward | more than 3 years ago | (#37021066)

Taco,

If you can't tell Moody's from S&P, you probably shouldn't be commenting on the issue.

Moody's still rates the US as AAA, as does Fitch.

Nitpick: Moody's doesn't have a "AAA" rating. There top rating is "Aaa".

So what you're saying is, the difference between Moody's and S&P is that one is case-sensitive and one is not?

Re:Case (0)

Anonymous Coward | more than 3 years ago | (#37021108)

That and not knowing the difference between their, there and they're.

Re:Separate agencies (4, Funny)

Sponge Bath (413667) | more than 3 years ago | (#37021152)

Fonzi rates US debt "Aaaaa..." and gives it a thumbs up.

Remember these was the same company that messed up (0)

Anonymous Coward | more than 3 years ago | (#37021004)

These were the same guys who gave a great credit rating to the sub-prime mortgage securities which ultimately killed this economy.

They also favor republican politics. John Chambers has attended a few GOP events in the past 8 years...

Hello, conspiracy???

Slashdot is becoming a tool for Propaganda (0)

Anonymous Coward | more than 3 years ago | (#37021012)

Anyone notice more and more that Slashdot posts more and more pro-administration articles? Is the user-voting mechanism being overrun by propagandists?

Amateur hour (3, Insightful)

TimHunter (174406) | more than 3 years ago | (#37021018)

S&P stands revealed as not understanding basic analysis of budget estimates.

http://krugman.blogs.nytimes.com/2011/08/07/i-heard-it-through-the-baseline/ [nytimes.com]

Re:Amateur hour (2, Insightful)

goldspider (445116) | more than 3 years ago | (#37021036)

Leave it to Paul Krugman to defend our current spending practices.

Re:Amateur hour (1)

Sponge Bath (413667) | more than 3 years ago | (#37021222)

There is nothing in that opinion piece defending current government spending practices. It is critical of S&P's understanding of CBO budget estimates. You should READ what Paul Krugman writes before condemning it.

Message To Congress (1)

s31523 (926314) | more than 3 years ago | (#37021038)

The downgrade was going to happen with or without a math error. The financial sector did not like the game of chicken that Congress played with the economy and now is being punished. Of course, the rest of us suffer too, but what is a little collateral damage. All the fat-cats had their short sales scheduled last week.

Probably intentional (1)

amagnus (2432492) | more than 3 years ago | (#37021044)

Aren't they the same fucks that gave banksters such as AIG AAA+ ratings before the bailouts? Remember the banksters crying for help and threatening to crash the economy? What bullshit. I wouldn't be surprised if this was all orchestrated as part of the North American Union plan.

Re:Probably intentional (1)

royallthefourth (1564389) | more than 3 years ago | (#37021082)

the North American Union plan.

All I have to say is lol.

Re:Probably intentional (1)

amagnus (2432492) | more than 3 years ago | (#37021218)

You obviously haven't been following politics closely. Henry Kissinger and Obama are great buddies and Kissinger is one of the original supporters of one-world government. Establishing the European Union and NAU (North American Union) are necessary to acquiring this goal. Don't believe me? Kissinger mentions Obama's role on Youtube! You can't get any more definitive than that. Wake up. Obama works for the banksters and Wallstreet. In a real free market economy they would have been left to bankruptcy. Instead, he transferred the greatest amount of American wealth to the banksters with no real conditions and gave the Fed new broad powers.

Re:Probably intentional (1)

mikael (484) | more than 3 years ago | (#37021204)

You will find that the credit rating agencies are owned by banks and international corporations. Wikipedia will give you the whole ownership chain of these companies.

did they use people who work for verizon call cent (1)

Joe_Dragon (2206452) | more than 3 years ago | (#37021048)

did they use people who work for Verizon call centers who can't even do basic math?

The politics matter (1)

Fractal Dice (696349) | more than 3 years ago | (#37021068)

I would argue that the mere fact that the threat of a default was bargaining chip on the table makes a downgrade justified.

Either the last month was all empty rhetoric or it wasn't. The fact that the threat of forcing a default elicited significant concessions proves that it was considered a legitimate risk and therefore, a downgrade makes sense.

How about a LESS BIASED summary (1, Insightful)

acidfast7 (551610) | more than 3 years ago | (#37021084)

"S&P still chose to proceed with their flawed judgment"

The judgement is not flawed ... AT ALL. With the revised GDP numbers from previous years, America does not deserve an "AAA" rating. However, neither do most other countries with a "AAA" rating.

But seriously, just GET OVER the fact that America is not fundamentally economically sound.

Every one complaining about S&P sounds like a 4-year whining about having their favorite toy taken away. S&Ps downgrade didn't place the America into the current position they're in. Lack of fiscal management from 1980 onward, did.

Right... and Wrong (1)

AdmV0rl0n (98366) | more than 3 years ago | (#37021094)

Someone somewhere has to provide the US with a wake up call about its current track. I don't think anyone would fundamentally argue that. Should the downgrade have happened? Maybe. But the Politicians are deeply split, and as such a downgrade is a reflection on how the world looking in through the window sees things.
I think it needs to be borne in mind about the US that its just come out of a Gov that held all three arms of the executive. And it seems at least to me to have been highly ineffective given it had the opportunity to deliver things it wanted to. Now, its not got all three parts, and life is very much tougher.

The downgrade itself should not have been said to be economic if you present figures that far out. Is the world to place its faith and planning around bad mathmatics? Seriously? If the people looking in through the windows can't count, and yet they can cause trillions to be wiped out by the waves they start in their tsunami of reckless stupidity, maybe they should be brought to book.

Finally, one of the aspects of the wide angle lense thrown over the whole thing is the abuse of the Tea party. I'm not sure why. They are vocally speaking about a think I hear from many Americans I meet, that being that actually they personally feel the Government has indeed become too large, and is indeed actually not doing things how they see or think it should. And in this, a very democratic thing is happening. That voice is holding a place at the table and getting a say. It may be that had the old way stayed as was, that voice may not have been at the table at all. Now, me personally, I can take or leave the tea party. But I don't see any harm in someone at the table fighting for some curbs in the US, because as far as I can see, that deficit is cripplingly bad. And the wider question probably needs asking of your US representatives. 'Why is it the Tea Party are getting to raise this issue - when you should have been dealing with this years ago'. And thats the question that should be posed to anyone Tea party bashing.

It seems to me that its not really that the Tea party bunch are so bad. Its that the rest are near their equals in the stakes of being so poor.

I'm an Anglophile. I hope the US gets back on its feet soon. The world needs you.

the press releases were already printed (0)

Anonymous Coward | more than 3 years ago | (#37021096)

The Sunday morning news shows were already booked, and the buy-ins from senior management and the chief economists had been secured.

Next time, try to point out these $2 x 10**12 typos in a more timely fashion.

Forgive us the gloating (2)

Chrisq (894406) | more than 3 years ago | (#37021100)

The countries that can gloat [wikipedia.org] are: Australia, Austria, Canada, Denmark, Finland, France, Germany, Guernsey, Hong Kong, Isle of Man, Liechtenstein, Luxembourg, Netherlands, Norway, Singapore, Sweden, Switzerland, and the United Kingdom

Forgive us for gloating that we have a higher credit rating in the UK, its just about the first chance we've had to gloat about anything related to our economy since 2008. I know that this probably won't last long - they probably just haven't got round to downgrading us yet!

as a European. (2, Insightful)

drolli (522659) | more than 3 years ago | (#37021112)

I dont get it.

One of the critical point is that S&P obviously believes that the deal made has unreasonable restrictions for future budget decisions, like the tax politics.

On the other hand i have never seen any political party so unwilling to accept (and clean up) the mess they made as the Republicans. Everybody knows the explosion of the deficit has nothing to do with Obama, it is the consequence of 2 wars at the same time started without specific goals, running over a decade, and insufficient results up to now.

So while the publically stated goals of the tea party may be understandable to me (everybody *sees* that things need to change), there is a significant difference between saying "we spend less" and "we just dont pay, even if we are obliged". The latter does not solve *any* problem (even if the right problem is stated), but destroys the trust of the insitution lending the money.

To say it in a analogy: If you have ordered something a restaurant, its not an option to say: "oh, i just dot pay this and dont eat it". Thats what they suggested. Obviouls there is significant difference to just not ordering something.

S&P are morons (1)

VincenzoRomano (881055) | more than 3 years ago | (#37021118)

as well as all other rating companies and all those who lend them a ear.

USA Downgrade (0)

Anonymous Coward | more than 3 years ago | (#37021128)

It hurts when it happens to YOU, doesn't it? Now imagine the effect decisions like this have when applied to other countries LIKE Portugal.

So what? (0)

Anonymous Coward | more than 3 years ago | (#37021144)

So what? S&P is a private entitiy and may rate anybody as they please.

Fact free. (1)

jamesl (106902) | more than 3 years ago | (#37021164)

Smoke and Mirrors. Cowards and Crooks. Liars and Lawyers. Fiction and Falsehoods. Deception and Deceit.

Same S&P which help caused the fuck up in 2007 (1)

Bill_the_Engineer (772575) | more than 3 years ago | (#37021172)

I'm sure we'll hear a lot of political ideology in today's comments, but I just wanted to remind folks that S&P reputation isn't that stellar. S&P and Moody's used mathematical models to rate mortgage backed securities as safe as governmental bonds back in 2007. Then about 90% of those bonds were then rerated as junk bonds which forced a large sell off.

I also want to remind folks that the treasury bond yield rates are the lowest they have ever been with a yield rate of 0.01 for 1 month, and 3.82 for 30 year. A downgrade by S&P may force the government to raise the yield rates on these treasury bonds in order to maintain current levels of borrowing (by the government). So keep all this in consideration while we debate the merits of a fox guarding the hen house.

Old news (2)

videoBuff (1043512) | more than 3 years ago | (#37021212)

Please somebody google the news "Standard & Poor's Clarifies Assumption Used On Discretionary Spending Growth" over the last two days from multiple places.

Changing their principal rationale to political? (4, Interesting)

AtariDatacenter (31657) | more than 3 years ago | (#37021244)

Please see their original report and press release. Here are some quotes from the August 5th press release:

"The political brinksmanship of recent months highlights what we see as America’s governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed. The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy."

"Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act. "

Their explanation didn't suddenly switch to political. It was there all along, yet so few pundits chose to focus on it.

So what checks did the govt write over the past 4 (1)

Marrow (195242) | more than 3 years ago | (#37021248)

Years?

I know people like to talk about futures and about entitlements and this and that. But I would like to see the cancelled checks. What did we literally write checks for over the last 4 years. Sorted by amount, application, and area of responsibility. Does anyone have that chart? How often is it updated?

But the political one is the correct one. (0)

bmo (77928) | more than 3 years ago | (#37021254)

Not using revenue as a tool to decrease the deficit is stupid. The Norquist Nutjobs hung together and they shall definitely hang together if people have a memory come 2012. Holding the rest of us hostage while you have your pissing contest by inserting language unrelated to the matter at hand just to make people reject it is unforgivable.

Boehner said he got 98 percent of what he wanted, a smashing victory for his side. So he can't blame the Democrats for the S&P downgrade.

Republicans, you waged war against the American People. Traitors.

Go ahead, mod me down. Fuck you. I'm mad.

--
BMO

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