Markets React To A Flawed S&P


As expected, Asian markets took news of the S&P downgrade of American creditworthiness poorly, opening to a loss.  But the losses were somewhat contained once the Group of Seven industrial nations announced intents to take all necessary measures to support financial stability.

President Obama has still not made a public statement on the downgrade, but his administration has blasted the measure, particularly as news surfaced that the decision was made in part based on bad math by S&P.  According to Politico, S&P sent a draft press release to the Treasury Department prior to its announcement.  That draft contained several numerical errors, setting off a heated exchange as administration officials tried to correct the firm’s work.

Among the errors were projections overestimating U.S. debt by $2 trillion.

A close read of the S&P report shows plenty of suggestions that the move was designed to break Republican intransigence over tax increases and to push policy makers to adopt steep spending cuts.  But that raises the question of whether or not manipulating credit ratings like that are appropriate or if S&P just overplayed its hand as a political actor.  It’s worth remembering that just prior to the collapse of Lehman Brothers, S&P reaffirmed that firm’s AAA rating.

While the S&P downgrade may make the case for expiration of the Bush tax cuts, it will be up to the Obama administration, and the media that covers them, to explain that to an American public that has been spoon-fed bad economic information and offered sound-bites instead of policy solutions.

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S&P Downgrades US Credit Rating

hoto from artemeustra via flickr.


Carole R.
Carole R6 years ago

What a mess. It's all very scary and very sad. :0(

Glenn M.
Glenn Meyer6 years ago

If you give away the American dream then you cannot be surprised when this country's third world status is recognized. S & P is probably dead on. See below.

Glenn M.
Glenn Meyer6 years ago

Cutting spending on, so called, entitlements is ineffective for addressing the deficit. Cutting programs that support the low and middle class will further strain both who don’t even receive lower prices as a result of the U.S. job losses and create a disconnect that will end in another financial collapse. The justification for attacking government benefits as opposed to raising taxes is the creation of jobs. But where?

Corporations have over-powered our government which now believes that out-sourcing and off-shoring of U.S. jobs is inevitable and necessary with expectations that the middle class should fall on their swords. It is the underlying cause of the financial collapse and borders on national security with the loss of our middle class tax base. Yet, this nation does nothing, not even demand it be restricted by whatever method. International businesses are doing the UN-AMERICAN activity of destroying U.S. salaries, U.S. businesses that hire in the U.S., and as an end result, destroying the U.S. marketplace while still demanding BUSINESS ENTITLEMENTS and protections for themselves.

Infrastructure spending and tax breaks will not replace enough jobs to keep up with the hemorrhaging loss of U.S. jobs from out-sourcing over seas. Neither party will do anything about it unless we begin grass roots efforts to protest out-sourcing and off-shoring of U.S. jobs. If nothing is done we will deserve what we get and it will get a lot worse before it gets better

Philip S.
Philip S6 years ago

The S&P is correct, many international rating companies have already downgraded the US this is just the first of the big 3.

Rob K.
Rob Keenan6 years ago

The flaw is all the rating agencies demanding spending cuts during a sluggish economy. Doing so repeats the mistake made in 1937 when due to large budget cuts the economy reversed from recovery to another depression.President Obama is deluding himself if he really thinks that his agreed to budget cuts and job creation will happen together.My,how was I to know three years ago I was working(volunteer) for and preparing to vote for a moderate Republica,,in Obama,not the somewhat Liberal Democrat I thought he was? My biggest concern is for my nephews and neices and great nephews and great neices and their age groups,because this may well be the beginning of an unending ecomomic decline for our nation.I hope Congress is enjoying it's August recess!

Ernest R.
Ernest R6 years ago

Remind me. Why did you guys vote the Repugs and the Tsers into office ?

Todd K.
Todd K6 years ago

You can only fix the problems when you acknowledge that they exist, and so far, almost noone cares to adress the actual problems, choosing instead to concentrate all their thought on the NON-ISSUES and MEDIA SIDELINES that are offered to keep people from ever even looking at the REAL problems that need to be fixed.

Wars. NOONE wants to fight a war who will ever be asked to fight it. The rich? They LOVE war. Bankers? They fund both sides, so they're not against it. Major corporations? They LOVE war. Government? It gives them a sense of control to go into other countries and murder innocent people. They LOVE war too.

"The Drug War." An abject failure on all fronts...but politicians love to lie about it, bankers don't care, because they'd never survive without all of the proceeds from laundering drug money. Prisons have been created so that investors can actually earn a living by investing in WAREHOUSES FOR HUMAN BEINGS. Prison guards jobs are all but guaranteed, as are most police and government agency positions. Beaurocrats, profiteers, prison guards, police, courts, prisons and their investors...they LOVE it. Looked at logically, why does granny's home-grown plant that helps her glaucoma/arthritis/alzheimer's/etc. make her a criminal? (A: Because pharmaceutical corporations dont profit from it, and government can't steal effectively if you have access to ANY form of natural medicine.)

As to the S&P's ratings being dropped as a "mistake", the only

Frank Mugford
Frank Mugford6 years ago

I'm totally amazed that there has not yet been another Revolution in the US! You got rid of the British king but ended up with the likes of bush and cheney! George Orwell's 'Animal Farm' comes to mind.
The Repugs/Teatards talk the most unbelievable rubbish; I'm very surprised that they have the balls to step outside their houses for fear of being assassinated. They are truly amazing.
I know, 'Let's tax the Poor and let the rich off, big time!'.
The rot has set in and the cracks are starting to appear. The US is no longer a trustworthy place, S&P have got it right, even if their maths is a little askew. China owns a lot of the US and things will only get very much worse for the US if they don't:- Have a revolution/refute totally moronic repug. ideology/start taxing the rich/start looking after the Middle-Poor Classes.
By the end of this Century, the US may not even exist, just a collection of loosely connected groupings of red neck dirt farmers.

Ralph F.
Ralph F6 years ago

The real unemployment rate is 16.1% when including the long-term unemployed (CNBC). The Banksters losses have been paid off by handing over public money (That's economic Fascism, folks). The USA continues to maintain military bases in 160 nations -- military spending is higher than all of the other major economies combined -- about 1 in every 5 dollars. The nation has the largest amount of stratification of any other industrial country. Bush-Cheney were owned by the oil companies, Obama is owned by the big banks. The country is in trillions of dollars of debt. Yup, the falling markets are because of S & P's rating.

Austin R.
Austin Rotter6 years ago

Flawed economic reporting... but whatever. I like the systematic swipes at S&P for their shortfalls in 08. Took three years for people to finally get on the same page as me in thinking that the ratings agencies should be abolished or at least hold far less leverage than they currently do.

The market is correcting from being way overinflated. Our outlook has been dismal at best and now people are realizing it and panicking. But thinking the Japanese market went down because one ratings agency knocked us down to a AA is flawed ...unless i am naive as to how stupid Japanese investors are.