The stock market plunged 4.3%

Not sure I understand this guy's argument. The " had S&P done its job" argument appears flawed in my opinion. The issue has nothing to do with S&P failed to do, but rather what the U.S. government failed to do. What the credit agency has done is translate into concrete terms what everyone around the world knew was wrong with the American economy.


I think the better argument would have been to explore the debt to GDP ratio of those that have been in similar situation and the country's earnings , and its political will as a measure of its ability to pay. Somehow, the U. S. has lost sight of responsible leadership on matters of this nature.

S&P has helped the government refocus on the issues.The issues of debt, its earnings, and the political system's ability to make tough long time decisions.

 

He is saying we haven't defaulted and they changed our rating as is we had.

 

You have given out too much Reputation in the last 24 hours, try again later

 

It's the thought that counts.

 

Yeah, but the plan we've implemented sucks. Most of the people that were upset about the legislation included people from groups like MoveOn.org and people who would invest time for Obama's re-election campaign. Democrats and Liberals were the ones who were most upset about the bill.

We may have avoided default but instead, Obama takes a political loss.

The S&P insisted that we needed a plan with a balanced approach, one that raises taxes and cuts spending. We didn't get that in the bill, so they decided to downgrade us. If the bill had a balanced approach and met their requirements, we would still have the AAA rating. The blame is put on the Republicans for their inability to approach this realistically.

And keep in mind that the other two credit rating agencies say that our country is "AAA with a negative future outlook", which means we could eventually get a downgrade from them a few months from now unless we get our fiscal house in order. Then, that would lessen the credibility for people and politicians to complain that we lost our triple A rating from a different agency. If something isn't done, we'd eventually get downgraded from the other agencies also.

 

Countries don't have to default before they change their credit rating. I am aware Canada had in the mid nighties a terrible credit rating. She did not default, I don't think. Rather, she went on a spending binge and gobbled up deficit after deficit before the Paul Martin years as finance minister.

It took the foresight of Paul Martin, a liberal, and his determination to work with the idea of balanced budgeting and the use of budget tools to get the debt to GDP ratio within manageable levels that finally got Canada back its triple A status. Canada demonstrated political will, used taxes, and also showed its seriousness through its conservative budgeting practices.

The budget deficit and the political will is amongst the concerns here. Government unlike a private entity is not in business for profit or the bottom line. Government assesses performance based on how much spending it does. Whereas a private entity assesses performance based on value added in measurable terms.

The performance metrics for government is mostly value based hence I would advocate its credit assessment should also be a combination of value based criteria and numbers.

 

America's political system is broken. S & P might have helped put focus on what is wrong with the system. The idea that they are not the best people to do that is flawed if indeed America has problems. At least the politicians can now see the tangible results of their indecision.

****************

Canada's story:

As Finance Minister, Martin quickly went to work and made the tough decisions that previous Liberal and Conservative Governments had failed to make. In 1994 Canada had one of the highest deficits compared to GNP of any of the G7 countries with no relief in sight. He cut back on transfer payments to the provinces, reduced spending on many social programs, froze increases on most others and reformed the CCP (Canada Pension Plan) in order to increase pension amounts and increase revenues, and increased some taxes. The results were financially spectacular. A yearly $42 Billion deficit was eliminated by the fourth year with ever increasing budget surpluses after that.

He then began to pay down the national debt which reduced Canada's debt to GDP ration each year and eventually led to the best ratio of all G7 countries with a reduction from about 70% to around 50% by the late 1990's. Martin managed to reduce Canada's debt to GDP ration form 70% to about 50% after just 5 years.

The process which Martin instituted caused a certain amount of hardship with many of the social and cultural programs across the country and a the time of his actions the Liberal's were ideally suited to make the hard decisions over financial matters which Martin made. The conservative opposition had fractured into the Progressive Conservatives and the Reform Party in the West and the PC and the Bloc in Quebec. The NDP were unable to present themselves as a viable alternative during this period fro many reasons.

Many Canadians were deeply concerned about the budget deficits and were willing to endure the hardships asked of them in order to get the finances of the country back on track. This was also a period of high growth in the North American marketplace and as a result of the North American Free trade Agreement, the high tech economic boom and Martin's actions, the measures he took were even more effective then was expected.

The fiscal responsibility and success which Paul Martin put in place and continued on with as Prime Minister had only recently been reversed with a return to deficit spending but that can be mainly attributed to the world economic crisis of 2008/9. Canada entered that crisis better prepared and in much more stable shape then almost any other country in the world.

Source:

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Does Canada's former prime minister hold the key to reducing Britain's budget deficit?

Paul Martin, the former prime minister of Canada, is clearly embarrassed by any suggestion that his brand of fiscal conservatism has become a model for David Cameron as the Tories covertly address multibillion-pound spending cuts in anticipation of power.

But whether he likes it or not, Martin, a tough – some say ruthless – finance minister before he became prime minister from 2004-06, is seen as a trailblazer of the right for the way he eliminated a crippling C$42bn (£22bn) budget deficit in just four years. And for Canada, read the UK, with its £170bn-plus deficit.

Just as New Labour gleaned valuable lessons from Bill Clinton's slick US presidential campaigns in the 1990s, so leading Conservatives are looking across the Atlantic – beguiled, it seems, by *Martin's no-nonsense approach to balancing a nation's books, whatever the initial social costs in civil service redundancies and deep cuts to welfare and healthcare *programmes.

Yet Martin, now 71, seems genuinely surprised by the interest from the Tories. He dismisses talk of being a *"messiah of the right", saying: "I would contest that." And he insists that he has had no contact with British Conservatives. "I have never met them," he emphasises. "No, I have not."

In truth, Martin, who is the keynote speaker at the Guardian's Public Services Summit next month, seems ideologically on a different wavelength from many British Conservatives. He is fiscally conservative, certainly, yet far more socially liberal, and economically innovative, than many Tories. He says he is the equivalent of a mainstream Democrat in the US.

Martin still bridles at any mention of the recent neocon *rampage not far across the US border from his Montreal home. He insists that withdrawing to small government, driving public services permanently to the "lowest common denominator", is the antithesis of a modern market economy. "No modern country can compete in a long period of time without education and basic research," he snaps. "The idea that you can wipe that out and let laissez-faire rule is not on."

continue here

Paul Martin:

 

The rating services should not exist. They don't provide good info. They all three rated the sub prime mortgage backed secrurities as AAA and they were junk. Righhhhhhhhhhttttttttt?????????? Their track record is poor. Why do you place trust in them to rule the world? They are causing harm by spooking.

 

Measuring "business trust" is not an exact science. Still as humans we need to have a set of criteria to measure it. This is the nature of business. So far when we weigh issues of trust on a set of probabilities, those especially weighted on qualitative and quantitative criteria, we have succeeded a bit. I think this argument should explain why they are still around.

The argument should be what sort of environment we would have without them. Yes, we know they need a lot of improvement, still they have their good uses that outweigh their uselessness.

 

If we can emulate what Canada did, we have a chance. Ideologically, I'm not sure if our country would be able to do that. A unique third party political entity (not the Tea Party) may be needed for us to embark on this if Democrats can't get enough political support from the American people.

 

What do you think about this jordan?

 

How can scrutiny be a bad thing? If you are on the up and up. :smt102

I think there are several things that are suspect in their ratings. Again I stand by the thought they do not serve a purpose.

If you have time.

I find this Prof. from U of Mo interesting. I watched this a while back and it took me forever to refind it......ony remembered him because all my family is in MO and I remebered him being from there.

This vid is from April when all the Greece stuff was going down not about the current situation but he speaks on the US situation back then.

If you are pressed for time watch the first minute.......he says these agencies are good indicators (tongue in cheek).........take what they say and the OPPOSITE is true. Also at the 4:00 point he talks about austerity being forced on Greece and premature austerity in GB and the effects.

http://finance.yahoo.com/blogs/dail...-agencies-harm-world-not-exist-142938601.html

 

just a thought

If you had purchased $1,000 of shares in Delta Airlines one year ago, you would have $49.00 today! If you purchased $1,000 of shares in AIG, you would have $33.00. If you purchased $1,000 of shares in Lehman Brothers, you would have $0.00 today. But, if you purchased $1,000 worth of beer, drank all the beer, turned in the aluminum cans for recycling, you would have $214.00. Therefore the best current investment plan is to drink heavily & recycle. It is called the 401-Keg Plan

 

Completely correct, thanks for the information.

 

By the way, the Dow Jones is down around 400 points right now, another bad day for Wall Street and the Markets.