# US Downgrade



## crazychickenlady (Jun 30, 2011)

I'm sure most of you noticed the news about the big drop in stocks on Thursday, and then the S&P downgrade on US status as of Friday evening. 

I was expecting a downgrade even though the debt ceiling deal went through because they didn't cut enough from the budget, according to S&P, but I thought it would take a few more weeks for that news to hit the fan.

So my question for the day is this...do you think the stocks will take another plunge on Monday?


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## RevWC (Mar 28, 2011)

The world market will dictate what happens on Monday. My thoughts, it will take another plunge.


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## jungatheart (Feb 2, 2010)

I think they will go down also. Is Obama playing golf this weekend?


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## IndigoLight (Apr 15, 2010)

S & P downgraded us to AA+
China (using their own rating agency) downgraded us to a single A.
And they hold most of our debt. So yes, I also expect the market to continue to slide.


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## Immolatus (Feb 20, 2011)

*Implications of downgrade by Deutchbank.*

It took me a bit to realize I could post an attachment.
My buddies wife had sent me this, she works for a foreign bank (not Deutchbank, and I know thats not spelled right and Im not looking it up even though Im a stickler for spelling) on Wall St in NYC. Its a presentation given to their brokers on the implications and likelihood of a downgrade.

Basically our economy hinges on the rest of the world, China specifically, loaning us money. We couldnt have put ourselves in a more precarious situation.
If China has us rated as an 'A' only, why would they buy our bonds?


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## crazychickenlady (Jun 30, 2011)

Interesting stuff. According to that pdf presentation, a one step downgrade does not have a huge effect on financial outlooks. But the stock market seems to react differently...buying when I think it is not prudent and selling at the drop of a hat. 

I guess we'll see what happens on Monday. And only time will tell if Moody's and Fitch downgrade the US too. It seems somewhat unlikely at this point.


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## The_Blob (Dec 24, 2008)

with all the 'e-traders' and uninformed individuals in the market now, isn't this simmilar to what happened in the 30s (people sold the second things got bad, making it worse and thereby losing everything) ?

my philosophy is to buy low, and NEVER sell 

jk, but it IS only a 'loss' if you sell

I guess many forgot the 'discretionary monies only' rule


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## crazychickenlady (Jun 30, 2011)

The_Blob said:


> with all the 'e-traders' and uninformed individuals in the market now, isn't this simmilar to what happened in the 30s (people sold the second things got bad, making it worse and thereby losing everything) ?


Yes, although now that we are 'conveniently' connected through cyberspace, it happens a lot faster.

I think we can expect a pretty unstable week starting on Monday. I don't think that it will shake down into everyday living right away. But I expect that the most likely effect on average citizens will be more rounds of layoffs coming up in the next couple months, which will cause Wall St to panic more, which will lead to more layoffs.

It may lead to some bargain stocks, but then you never know when the market hits bottom, so you may lose a lot of value short term. Like you said, Blob, don't sell those stocks unless you want to lose $.

I, for one, am investing in chickens...they pay me in meat and eggs...and entertainment. Maybe I'll buy me some ducks too. And canning jars, definitely need some more canning jars.


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## stayingthegame (Mar 22, 2011)

just read that china wants to make a "global reserve currency" . since they hold so much of our debt I find this scarey. they also want us to cut our military spending and our social programs. double scary.


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## Immolatus (Feb 20, 2011)

crazychickenlady said:


> Yes, although now that we are 'conveniently' connected through cyberspace, it happens a lot faster.


Not only faster, but there have to be billions more shares, and (b?)millions more investors now than there were back then.


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## crazychickenlady (Jun 30, 2011)

stayingthegame said:


> just read that china wants to make a "global reserve currency" . since they hold so much of our debt I find this scarey. they also want us to cut our military spending and our social programs. double scary.


They have been meeting behind our backs to change the reserve currency from US Dollars to a basket of more stable currencies for quite some time. They got together with Russia and decided to bypass USD altogether in their transactions with each other...I think that was earlier this year, or maybe last year....I forgot.

I can understand why other countries would want to kick the USD out and go for a more stable basket of currencies, like the Swiss Franc, etc. Seeing how our country is undermining our own economy by printing extra money, causing inflation, arguing amongst ourselves and generally causing lots of problems for the rest of the world. Can't say I'm too proud of the leadership these days. But if the reserve currency changes, we will have short term (if not long term) instability in this country.

Yeah, just can't imagine why China would want us to cut our military spending, can you? And that is exactly what will happen with this budget cut deal, if they can't come to a compromise in time...gee, now there's some inspiration for ya. :gaah:


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## crazychickenlady (Jun 30, 2011)

Reading the news today, it looks like all of the financial news is agreeing with my intuition that the stocks will plunge tomorrow (not that I am all that cutting edge on these things). It's already starting with Tel Aviv and Dubai. Wall street is calling on investors not to panic, and G-7 leaders are teleconferencing on how to stop a market crash.

Germany doesn't want to bail out Italy...so the European debt crisis is getting worse, and all of their leaders are on holiday....hmmm, so are ours, for that matter. France is in line for the next credit downgrade.

Add to that the fact that BofA has let the cat out of the bag on their mortgage liabilities being much worse than they were letting on...I think we are in for a very wild ride tomorrow...straight down.

Sorry to be depressing, but I think that this is going to be worse than the last crash.


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## BillS (May 30, 2011)

The_Blob said:


> with all the 'e-traders' and uninformed individuals in the market now, isn't this simmilar to what happened in the 30s (people sold the second things got bad, making it worse and thereby losing everything) ?
> 
> my philosophy is to buy low, and NEVER sell
> 
> ...


Nobody should be in the stock market right now. It's headed for a crash. There's something to be said for getting out when you can with as much as you can. We can't do anything about my wife's 401k. Her money is in various stock funds. I wish we could use it to buy gold coins but that's not an option.


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## RevWC (Mar 28, 2011)

:shtf::shtf::shtf::shtf::shtf::shtf::shtf:enough said..


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## Immolatus (Feb 20, 2011)

crazychickenlady said:


> Yeah, just can't imagine why China would want us to cut our military spending, can you? And that is exactly what will happen with this budget cut deal, if they can't come to a compromise in time...gee, now there's some inspiration for ya. :gaah:


I would counter that China would be only too happy if we continue to spend money on our now unsustainable military. We are stretched very thin with all of our wars in the middle east, they realize we are no threat to them militarily, nukes notwithstanding. In its current state, the military industrial complex is a huge drain on our economy. China doesnt need to go to war with us, they could easily pull the rug out from under us in a number of ways. They loan us a ton of money, have taken a ton of our manufacturing jobs, and import tons of goods here. They could just cut us off in one of these areas and we would be screwed.


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## Turtle (Dec 10, 2009)

I was listening to cspan radio this morning, and they said that S&P is considering dropping our rating further, citing the fact that no efforts have been made to correct the situation.


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## Turtle (Dec 10, 2009)

I was listening to cspan radio this morning, and they said that S&P is considering dropping our rating further, citing the fact that no efforts have been made to correct the situation.


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## crazychickenlady (Jun 30, 2011)

I agree that China knows that we are not a military threat, because they hold so much of our debt that no one in our gov will stand up to them. But I think that they would like to see us demoralized and demilitarized to a certain extent, plus it would mean that we might start paying them back some of that debt.

And yes, Turtle, I also saw that the S&P has threatened a further downgrade, also Moody's has given us a negative outlook too. What happens next all depends on budget cuts and income (taxes) raised in the coming month.

I had a feeling that the stocks would plunge today, but I really hate being right about these things.


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## Immolatus (Feb 20, 2011)

From here, damn good explanation.

The U.S. debt downgrade.
Republicans are already calling it "The Obama Downgrade." Democrats are calling it "The Tea Party Downgrade." And the Treasury is calling it a disgrace--brought to you by the same incompetent idiots at S&P who rated junk housing bonds AAA.
So who's really to blame?
All of the people who are pointing fingers. *And American voters, who elected them.*
Regardless of what you think about the timing or specific logic of S&P's downgrade, there's no question that the U.S.'s financial position has deteriorated massively in the past 10 years. And last week, a significant portion of the American government was ready (eager?) to force a default in the debt-ceiling debate just because it wasn't getting EXACTLY what it wanted.
Given those two factors, the debt downgrade was perfectly reasonable. And as much as politicians try to blame it on "the other guys," they're all responsible. As are we, for hiring them.
One incumbent the downgrade is almost certainly bad for is President Obama, which is probably why the Treasury is screaming so loudly trying to pin the blame on S&P. It also seems reasonable to think that the downgrade, combined with the still-lousy economy, will hurt Obama's chances of getting re-elected.
We can only hope that, if Americans do vote for "change" in 2012, we don't elect an extremist in his place. Other countries in similarly tough economic circumstances have done this, and the result has been disastrous.


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## StrayDog (May 2, 2011)

Whats funny in all the statements I have been reading over several of the past days is the typical blame game. What I have NOT seen is us calling in debt OWED to us... Strange.


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## BillM (Dec 29, 2010)

*The problem*

This problem was set in motion in 1913 when the Federal reserve was given the athority to print our money.

We have a fractional reserve centeral banking system based on a fiet currency. It used to be backed 100 % by gold and silver.

No centeral banking system has ever lasted over 200 years.


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## BillS (May 30, 2011)

The real problem isn't the $14 trillion. It's the fact that there are at least $60 trillion in unfunded liabilities. Tax revenues are about $2 trillion. Official spending is $3.6 trillion. Unfunded liabilities like social security, medicare, and federal pensions are another $5.3 trillion. So that means there's about $2 trillion for income and about $9 trillion in spending and unfunded future expenses. When you see those numbers you realize that our debt should be at junk status right now. We are waaaaaayyy past the point of no return.


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## partdeux (Aug 3, 2011)

Immolatus said:


> there's no question that the U.S.'s financial position has deteriorated massively in the past 10 years.


10 years? Try 25ish when the govt got the ingenious idea to start exponentially expanding the money supply without constraint.


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## crazychickenlady (Jun 30, 2011)

I agree with BillM...putting your faith in paper money that is not backed by a solid good...gold and silver, for example...works only as long as the people believe in it. You are starting to see people lose faith in the current system, and the paper money no longer instills the same confidence.

American dollars no longer have the same purchasing power that they once had, and it has become more pronounced in the last couple of years. Average Americans notice it from week to week when the grocery bags have the same stuff in them, but their wallets are thinner.

Now the investors want to see the Feds make some sort of announcement about how they are going to fix things today. And the last little dead rabbit that they can pull out of their hat is QE3. If they don't do this, the stocks will plunge again...although I think that they will recover a bit over the next week or 2 (however, it remains to be seen if more bad news will hit and things get worse). If they do announce QE3, well we are looking at a further devalued dollar and more inflation...which will affect your Average American even further in a few weeks. Sounds like a lose-lose situation to me. Better to let the markets do what they are going to do and be done with it.

Maybe that sounds a bit cavalier, but I don't take this lightly...we just saw our retirement funds shrink yesterday...but it seems like everything they try to do just backfires and makes the whole mess even bigger.

In our everyday life we have been building relationships with our neighbors and friends that allow us to barter for more things. I give eggs and produce to neighbors for bales of hay and help around the place. And that is a system that will always work (as long as no one steals your goods from you). Maybe we will have more of that going on in our lives in the next few years...what do you think?


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## BillS (May 30, 2011)

I keep waiting for hyperinflation to kick in. With all the money printing it's only a matter of time. I think something could happen out of the blue to cause a stock market crash or an economic crash. Maybe it's the sudden deterioration in the value of the dollar and the loss of the dollar as the world's reserve currency. Or maybe it's a terrorist attack or huge natural disaster that gives the whole world economy a big push.

If there's a crash anybody with a farm or fruit trees could see themselves overwhelmed by hungry people, depending on the time of year. If the crash happens and electricity goes out for the last time on December 1st it'll be a lot easier on those of us who live in the north and are prepared.


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## partdeux (Aug 3, 2011)

crazychickenlady said:


> If they do announce QE3, well we are looking at a further devalued dollar and more inflation...which will affect your Average American even further in a few weeks. Sounds like a lose-lose situation to me. Better to let the markets do what they are going to do and be done with it.


Did anybody hear anything about cutting the budget to match REAL revenue? Crickets chirping?

While I suggest that with all seriousness, pulling 1.5T (or more if you include off book spending) would have a devastating impact on the economy, world wide.

Personally, I'm unable to cypher a solution that doesn't lead to major negative impacts. Fed's QE-"x" only puts off the final day of reckoning.


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## crazychickenlady (Jun 30, 2011)

BillS said:


> I keep waiting for hyperinflation to kick in. With all the money printing it's only a matter of time. I think something could happen out of the blue to cause a stock market crash or an economic crash. Maybe it's the sudden deterioration in the value of the dollar and the loss of the dollar as the world's reserve currency. Or maybe it's a terrorist attack or huge natural disaster that gives the whole world economy a big push.
> 
> If there's a crash anybody with a farm or fruit trees could see themselves overwhelmed by hungry people, depending on the time of year. If the crash happens and electricity goes out for the last time on December 1st it'll be a lot easier on those of us who live in the north and are prepared.


When everything is stretched so tight, and many people living in homeless camps, all it would take it a police officer shooting someone...hence the riots in London...to push people over the edge. I think that it will take a few days to reach those of us who live in rural areas, but it will reach us. We are in the process of planting more trees, etc. to hide from the road a bit more. Unfortunately, we are pretty visible. I would be pretty worried if rioting or stealing were to hit our area.

On our walk this morning, hubby admitted to me that he thinks a world wide depression is starting...and he is usually the last to panic and take off the rose colored glasses. 

So even if you have the means to survive without a lot of goods from the stores, etc....you may want to work on making your property more covert. Don't leave the chickens pecking around in the front yard, move any firewood to a secure location in your garage or barn, things like that.


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## crazychickenlady (Jun 30, 2011)

partdeux said:


> Did anybody hear anything about cutting the budget to match REAL revenue? Crickets chirping?


Cue the Disney soundtrack...

With all of the 'best and brightest' unable to come up with real solutions, I'm not surprised you are having trouble thinking of solutions too!

Unfortunately, I think we can expect the revenue to shrink, exacerbating the problem.

I noticed yesterday that the Big Lots in town closed...wow, just wow...when people can't even afford Big Lots stuff we are in a world of hurt.

So prepare yourself for another round...and I don't mean a round of drinks...I'm talking another round of layoffs, depreciation of real estate value, etc.


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## Clarice (Aug 19, 2010)

There is a solution but no one wants to hear it. Stop giving our money to foriegn countries. Stop given money to foolish projects by way of grants that are never paid back. Stop pork barrel politics. Make all elected officials responsible for their own health insurance, security and transportation. This is just a start, I'm sure others have many ideas that are better than these, but who will listen??????????????


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## partdeux (Aug 3, 2011)

Clarice said:


> There is a solution but no one wants to hear it. Stop giving our money to foriegn countries. Stop given money to foolish projects by way of grants that are never paid back. Stop pork barrel politics. Make all elected officials responsible for their own health insurance, security and transportation. This is just a start, I'm sure others have many ideas that are better than these, but who will listen??????????????


Nobody that wants that can be elected. It's almost hilarious to listen to people want to protect their pet beliefs and not understand we have to cut back A LOT.

When the sheeple can not even understand that "cuts" are nothing more than a decrease in the SCHEDULED INCREASES, we're screwed.


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## BillS (May 30, 2011)

crazychickenlady said:


> When everything is stretched so tight, and many people living in homeless camps, all it would take it a police officer shooting someone...hence the riots in London...to push people over the edge. I think that it will take a few days to reach those of us who live in rural areas, but it will reach us. We are in the process of planting more trees, etc. to hide from the road a bit more. Unfortunately, we are pretty visible. I would be pretty worried if rioting or stealing were to hit our area.
> 
> On our walk this morning, hubby admitted to me that he thinks a world wide depression is starting...and he is usually the last to panic and take off the rose colored glasses.
> 
> So even if you have the means to survive without a lot of goods from the stores, etc....you may want to work on making your property more covert. Don't leave the chickens pecking around in the front yard, move any firewood to a secure location in your garage or barn, things like that.


When the power goes out we're going to move our cars a block away so the casual observer won't think we're home.


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## BillM (Dec 29, 2010)

*Moving cars*



BillS said:


> When the power goes out we're going to move our cars a block away so the casual observer won't think we're home.


Won't that actually encourage a break-in?


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## BillS (May 30, 2011)

That's a good point. Maybe it's best to not hide the fact that you're home early on. At some point though just the fact that you're alive would let people know you have food.


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## stayingthegame (Mar 22, 2011)

the give a ways to other countries is for our safety. we don't want them upset and hungry because they may come after us. if we had most of our troops home here, who cares if angry guns come after us. but with no one guarding our doors how will protect ourselves?? look after every depression, what happened? 
we got in a war. after that (because of death) there were more jobs and a better economy. sooooo guess what may happen in the not to distance future?


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