Friday, August 05, 2011

Standard & Poors getting ready to downgrade US credit, cites poor quality of Congressional behavior and capability of people who "serve" in office; U.S. says S&P miscalculated; "It's done!"

ABC News is reporting, right after the Wall Street bell rang with a slight improvement on “Black Friday”, that Standard &  Poors  is going to (or is very likely to) downgrade the United States bond rating, either to AA or AA+. Treasury officials are preparing for this. This will mean slightly higher interest rates and lower bond prices, but higher yields on new bonds (but not on existing bonds which can drop in value).  This may not be good news for retirees with heavy bond portfolios. However, some reports say that interest rates would raise only if Moody’s also downgrades, which is thought to be unlikely right now.

Standard & Poors is upset with the political gridlock in Washington, with its inability to act decisively to restore fiscal credibility, and even with the inability of the electorate to place intellectually capable people (of any party or no party) in office (or the disinclination of people who would do a better job to run at all).  The ABC blog Breaking News story is here.

On "World News Tonight" ABC reported that the Administration claims that S&P has made a major miscalculation and may be able to rebut the numerical arguments that would be published with a downgrade.  So just maybe it can be sidestepped.   This would be the first such downgrade in US history (even to be taught to high school history classes).

MSNBC and CNN have yet to carry this story (as of 6:50 PM Friday).  

Picture: an "off ramp" on a hiking trail in Shenandoah. There were no "off ramps" on the debt ceiling, according to Carney.

Update: later Friday

The downgrade to AA+  has taken place. S&P says the calculation error would not affect the result. The effect on bond prices is not yet clear.  Here are Ali Velshi and Anderson Cooper:

On Yahoo!, Daniel Gross writes, "Is US Credit Rating a Victim of GOP Sabotage?" here.

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