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Title: Will S&P Downgrade Be Another Y2K Scare?
Source: Naked Capitalism
URL Source: http://www.nakedcapitalism.com/2011 ... rade-be-another-y2k-scare.html
Published: Aug 6, 2011
Author: Yves Smith
Post Date: 2011-08-06 09:49:29 by lucysmom
Keywords: Chicken Little, Obama Did It, Pot, Kettle
Views: 41358
Comments: 76

It isn’t yet clear what the impact of the S&P downgrade of the US to AA+ will have. There are good reasons to believe, despite the media hyperventilating, that it won’t add up to much, and may perversely hit wobbly stock markets more than Treasury yields.

But there is a much bigger issue, namely S&P’s highly questionable conduct, the lack of any analytical process behind this ratings action, and the political implications.

Will the S&P Downgrade Have Much Immediate Impact?

Although I run the risk of being proven wrong, there are lots of reasons to think that the reaction in the Treasury market to the news will be underwhelming. We might see some reactions Monday as some investors who managed to be blindsided and aren’t happy with the downgrade exit but conversely, I know of investors who see any price softening as a buying opportunity.

Treasury yields fell 50 basis points last week despite the risk of a downgrade being very well telegraphed. S&P had asked for $4 trillion in deficit reductions (it tried disavowing that number) and made it clear it was going off to brood and might take action. And this market response took place with S&P leaking like a sieve.

Click for Full Text!


Poster Comment:

What was the S&Ps role in the mortgage crisis?

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Begin Trace Mode for Comment # 14.

#1. To: Badeye, A K A Stone, hondo68, Fred Mertz, Godwinson, go65, war, no gnu taxes, Skip Intro, ferret mike, jwpegler, brian s, mcgowanjm, Capitalist Eric, Mininggold (#0)

A country that controls its currency can always satisfy the IOUs it creates. The risk is inflation, not default. But ratings agencies assess credit ratings, not interest rate risk.

lucysmom  posted on  2011-08-06   9:55:55 ET  Reply   Untrace   Trace   Private Reply  


#2. To: lucysmom (#1)

The risk is inflation, not default. But ratings agencies assess credit ratings, not interest rate risk.

Inflation is over.

From Nixon's Gold Default to May 2005....that was inflation.

It's Deflation now, as everyone goes to cash...;}

mcgowanjm  posted on  2011-08-06   10:51:03 ET  Reply   Untrace   Trace   Private Reply  


#3. To: All (#2) (Edited)

Think $100 per acre for Prime Farmland.

mcgowanjm  posted on  2011-08-06   10:51:21 ET  Reply   Untrace   Trace   Private Reply  


#4. To: All (#3)

And then $50.

mcgowanjm  posted on  2011-08-06   10:51:50 ET  Reply   Untrace   Trace   Private Reply  


#5. To: mcgowanjm (#4)

Think $100 per acre for Prime Farmland.

And then $50.

I suppose that translates into a 50% cut in food prices as well.

Thunderbird  posted on  2011-08-06   11:00:44 ET  Reply   Untrace   Trace   Private Reply  


#6. To: Thunderbird (#5)

I suppose that translates into a 50% cut in food prices as well.

Remember gasoline for a $1?

It'll be a $ again.

Except that the avg yearly salary will be $7500.

And you'll be growing your own food, btw....;}

mcgowanjm  posted on  2011-08-06   11:03:42 ET  Reply   Untrace   Trace   Private Reply  


#14. To: mcgowanjm (#6)

Remember gasoline for a $1?

It'll be a $ again.

Except that the avg yearly salary will be $7500.

And you'll be growing your own food, btw....;}

Can you tell me when they are going to evacuate Florida?

Because my father took my son to the Gulf at the beginning of summer. They caught some fish and ate them.

They have some in the freezer too and are going to have a fish fry soon.

My aunt lives down there too, Fort Walton Beach area. They say the area and fish are fine. Her and her husband were both democrats by the way. They despise Obama.

A K A Stone  posted on  2011-08-06   15:03:02 ET  Reply   Untrace   Trace   Private Reply  


Replies to Comment # 14.

#16. To: A K A Stone (#14)

Can you tell me when they are going to evacuate Florida?

Can you explain why you have faith in the State?

Why you believe that the State and bp not evacuating the GoM means that the GoM is now Safe?

Of course not.

Sweet baby hesus. Wait for it...;}

The USSA is on the defensive, and in survival mode. Big bets and grand gestures have no place in this endgame.

There will be no evacs anymore. Quarantine in place. While refusing World Aid.

Tea Party Evangelicals will be ridden like borrwoed mules until they drop. War...is the Health of the State now.

Good Citizen....;}

mcgowanjm  posted on  2011-08-06 22:28:34 ET  Reply   Untrace   Trace   Private Reply  


#17. To: A K A Stone (#14)

They say the area and fish are fine.

Then by all means, go right ahead and believe them.

I have two nieces who just got back from Pensacola. On a Deep Sea Charter they caught Two fish. And only then because the Charter went into restricted waters...

There's 3 VLCC's + 1 MMB of Antifreeze out there and on the Bottom.

The Next Cat 3 will bring it ashore.

Do what the fuck you want. Believe the State and bp...

Go ahead. 8D I ain't eating a fucking thing out of the Gom until whenever....a long time I'm sure...;}

mcgowanjm  posted on  2011-08-06 22:32:26 ET  Reply   Untrace   Trace   Private Reply  


End Trace Mode for Comment # 14.

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