...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.
Chat Forum
USA has lost AAA rating
-
Posted 9 months ago #
-
Oops.
Posted 9 months ago # -
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.
Posted 9 months ago # -
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)
Posted 9 months ago # -
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)
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!
Posted 9 months ago # -
And this is what all the previous weeks/months of brinksmanship in Congress was supposed to avoid?
Posted 9 months ago # -
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.
Posted 9 months ago # -
It's still all politics then
Posted 9 months ago # -
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
Posted 9 months ago # -
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).
Posted 9 months ago # -
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.
Posted 9 months ago # -
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.
Posted 9 months ago # -
Breaking news:
eBay has downgraded the US's seller status to AAAAAAA++++++!!!!! EXCELLENT BUYER!!!!11
Posted 9 months ago # -
Does this mean the pound is now worth tree fitty?
Posted 9 months ago # -
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.
Posted 9 months ago # -
stevious
Posted 9 months ago # -
I thought the main point of avoiding a default was to avoid a drop in their credit rating?
Posted 9 months ago # -
a drop in credit rating can be taken on the chin.
The shit storm of a default cant.
Posted 9 months ago # -
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?
Posted 9 months ago # -
+ 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
Posted 9 months ago # -
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...
Posted 9 months ago # -
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
Posted 9 months ago # -
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!
Posted 9 months ago # -
I guess you can now trade oil directlly in Chinese denominated currencies? Welcome to the realisation of eurodollar theory.
Posted 9 months ago #
Reply
You must log in to post.
