Image via WikipediaWhen it comes to rating the credit worthiness of sovereign nations it is on a different level than that of rating corporation debt risk while being paid by the corporation you are rating. Here you are not being paid by the country in question so you actually have to be honest? You have to actually look at financial data available and take into consideration the country’s government and their plans for stabilizing their economy?
Lately, countries like Greece have been in the news about the “junk” status of their bonds and the fact that the European Union has had to shore up Greece’s finances or risk the country defaulting on its debt which would be catastrophic since many institutions own billions in Greek bonds; their investments would become worthless and Greece would have a hard time borrowing any money after a default although not an impossibility as in the case of Argentina in 2002.
Standard & Poor (S&P) downgraded the U.S.
Are U.S.
Can we use political in-fighting as a reason for downgrading a county’s credit worthiness? I suppose, if political parties are so set in their ways (read Tea Party) that they would welcome a default in place of giving in to something they do not believe in (more debt).
S&P has admitted that they did not have their U.S.
S&P has based their rationale for the downgrade in political instability and the fact that no reasonable plan to stabilize the economy is on the table and they may have a point there.
BUT does that give them the basis for downgrading the credit risk of the United States of America
Could it be because Congress is getting ready to kick their ass as contributors to our financial doldrums because they rated toxic assets as AAA and worthy to be bought with no risk?
I have to feel like they are doing a pre-emptive strike here; if Congress decides to limit their rating power because they screwed up so badly with the toxic assets case, they will have a reason to blame Congress for their vengeful actions not for rating toxic assets AAA, but for downgrading the U.S. credit worthiness.
Do you think there is method to their madness?
Midwestern oil tycoon Warren Buffett, presented his quick and easy solution to America's debt problem on CNBC:
ReplyDeleteI could end the deficit in five minutes. You just pass a law that says that anytime there is a deficit of more than three percent of GDP all sitting members of congress are ineligible for reelection.