Viewing 24 posts - 1 through 24 (of 24 total)
  • USA has lost AAA rating
  • mrgibbons
    Free Member

    …that ugly sound you hear is the sound of a really large bath tub of sovereign debt poop starting to hit the fan…

    it is going to be one rough next couple of years.

    althepal
    Full Member

    Oops.

    TooTall
    Free Member

    lost it with one of the three agencies using sums the US disagrees with:

    The other two major credit rating agencies, Moody’s and Fitch, said on Friday night they had no immediate plans to follow S&P in taking the US off their lists of risk-free borrowers.

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    thegreatape
    Free Member

    How impartial/independent are these agencies, or I suppose really, how much pressure can be put on them not to downgrade a country? (The ones that haven’t done so)

    peterfile
    Free Member

    I just posted this in another thread on here, so sorry for the repost, but it’s more relevant here…..

    Wow. That was quick! S&P have downgraded to AA+ a few hours ago. Bloomberg news report

    I genuinely didn’t think they would get in there that quickly.

    S&P and Moody’s ratings aren’t gospel, but LOTS of people do pay attention to them. A bit like The Times university league tables. You might not agree with how they arrive at the result, but you’d still be unlikely to attend one of the universities they list in 200th place!

    This article is quite clear/simple at highlighting the main effects that may occur as a result of a downgrade (I don’t mean that you guys would have trouble understanding it if it wasn’t simple though, it’s just that the mechanical effects on the market are actually quite hard to get your head round, this article just sets out the “real world” effects)

    US downgrade – 5 effects

    This is a significant issue for anyone with open currency positions at the moment. Forex market is closed from late on Friday night until the Asian session on Sunday night. What that means is that the market will “gap” (where the price it opens at will be have a gap between where it left off on Friday night). This isn’t uncommon, but there’s nothing you can do about it. If you were shorting USD, you’re laughing, you’ll make an absolute killing. If you were long in USD/JPY or USD/CHF in particular (which quite frankly was a silly thing to do right now anyway) you’ll lose some serious wedge on Sunday night unless you had some stop losses in place.

    I’m long GBP/USD, which means I should wake up on Monday morning with some lovely, and rather unexpected gains. But not quite as much as if I was in CHF or JPY.

    Happy trading!

    thegreatape
    Free Member

    And this is what all the previous weeks/months of brinksmanship in Congress was supposed to avoid?

    MSP
    Full Member

    thegreatape – Member

    How impartial/independent are these agencies, or I suppose really, how much pressure can be put on them not to downgrade a country? (The ones that haven’t done so)

    Not at all impartial, when you look at the reasons for downgrading the debt rating its straight from the republican dogma handbook.

    thegreatape
    Free Member

    It’s still all politics then

    peterfile
    Free Member

    It’s still all politics then

    Very much so.

    It’s just different interpretations/spins on the same situation.

    A perfect storm of political spin and investor speculation. Combine the two and you arrive at where we are now….utter bloody chaos 😀

    jonb
    Free Member

    I was thinking about this and the ratings are important if you are investing in funds and companies but how much of an impact will this have on people investing in America in reality. Will the interest really rise that much? Surely it’s not going to get to Italian/Spanish levels?

    I just can’t see Pension funds/China saying we’re moving our cash to Norway because it looks a lot safer. I suppose the main thing people are worried about are currency inflation and the value of their investment inflating away. Anway, off to look at gold and tinfoil (I think there’s going to be a boom for all the hats required).

    CaptJon
    Free Member

    Let’s not forget that the major credit ration agencies rated toxic CDOs (which contained sub-prime loans) as AAA before everything went a over t.

    peterfile
    Free Member

    I just can’t see Pension funds/China saying we’re moving our cash to Norway because it looks a lot safer.

    The problem is, when you are investing/hedging, you look for currency which will hold its value. If I was a fund manager, I would be buying CHF and JPY, not USD. With all that USD knocking around, the value will drop.

    CHF is always considered a safe haven, but to be honest i’ve always had my doubts, all it would take is a change in privacy or tax laws and CHF would drop like a brick.

    stevious
    Full Member

    Breaking news:

    eBay has downgraded the US’s seller status to AAAAAAA++++++!!!!! EXCELLENT BUYER!!!!11

    MrWoppit
    Free Member

    Does this mean the pound is now worth tree fitty?

    Northwind
    Full Member

    thegreatape – Member

    And this is what all the previous weeks/months of brinksmanship in Congress was supposed to avoid?

    No, that was to avoid defaulting entirely.

    mastiles_fanylion
    Free Member

    🙂 stevious

    thegreatape
    Free Member

    I thought the main point of avoiding a default was to avoid a drop in their credit rating?

    Stoner
    Free Member

    a drop in credit rating can be taken on the chin.

    The shit storm of a default cant.

    thegreatape
    Free Member

    What are the effects of each?

    Drop in credit rating – greater reluctance to lend to them, and higher interest rates for them to borrow.

    Default – the same but to a much greater extent, or altogether different?

    Stoner
    Free Member

    + a big wobbliness to the world’s primary reserve currency in which the vast majority of trade is transacted, and the value of which is still effectively pegged to the USA’s ability to honour their debts.

    I find myself agreeing with the Chinese that the world needs an alternative reserve currency not attached to any one economy. It would also make it easier (economically and politically) for the Chinese to then revalue the Renminbi.

    In the meantime, the Chinese are probably laughing their socks off at the opportunity to poke the USA in the ribs with a pointy stick 🙂

    deus
    Full Member

    Does that mean the Canadian dollar will take a nose dive too (their major export market is the states), as i’m going to Whistler on the 17th and was debating leaving getting money for a few more days…

    deserter
    Free Member

    Does that mean the Canadian dollar will take a nose dive too

    I hope so as I moved to Canada over 2 years ago and still haven’t changed my GBP due to the terrible exchange rate

    BearBack
    Free Member

    Does that mean the Canadian dollar will take a nose dive too

    I hope so as I moved to Canada over 2 years ago and still haven’t changed my GBP due to the terrible exchange rate

    Probably not quite as significant as if the USA had defaulted..

    However, whilst it may appear to be a good thing in our situation (also waitng to move £ to $cad) it also probably means that our houses will be worth less, cost of living will rise etc.. so swings and roundabouts.

    Basically I think the best situation for us is for the price of oil to fall significantly as that’s what seems to drive the $cad

    Remember Canada didn’t get affected by the sub prime lending crisis that thee USA/UK did.. so Canada aren’t hanging off the USA back pocket.

    I’m dreaming of seeing 2.35/£ at some point.. good for my £, good for my tourism business!

    oliverd1981
    Free Member

    I guess you can now trade oil directlly in Chinese denominated currencies? Welcome to the realisation of eurodollar theory.

Viewing 24 posts - 1 through 24 (of 24 total)

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