This is why you don’t fuck around with the debt ceiling:

“Although Fitch continues to believe that the debt ceiling will be raised soon, the political brinkmanship and reduced financing flexibility could increase the risk of a US default.”

“Although the Treasury would still have limited capacity to make payments after Oct 17th it would be exposed to volatile revenue and expenditure flows. The Treasury may be unable to prioritize debt service, and it is unclear whether it even has the legal authority to do so.”
“The prolonged negotiations over raising the debt ceiling (following the episode in August 2011) risks undermining confidence in the role of the US dollar as the preeminent global reserve currency, by casting doubt over the full faith and credit of the US. This “faith” is a key reason why the US AAA rating can tolerate a substantially higher level of public debt than other AAA sovereigns.”

“The US is the most heavily indebted AAA rated sovereign, with a gross debt ratio equivalent to double that of the AAA median.”

Self inflicted wounds, courtesy of Tea Party wankers.

Category: Analysts, Credit, Really, really bad calls

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

57 Responses to “USA’s ‘AAA’ Placed on Rating Watch Negative at Fitch”

  1. Lets have a vote, and if we need to do massive cuts, I say we apportion them relative to how the state’s voting block voted.

    • ilsm says:

      Yes, it would also help bring the pentagon in line. Pentagon should be 25% of discretionary not 50%.

      Red states tend to be big on war plants and bases……………………..

      A factor in their getting more than they sent to the federal government.

      Wichita Kansas can live without Boeing’s 60 year long running military aircraft rework facility. Oklahoma has too much DoD. Alabama, Louisiana, Florida, Georgia……….

      DoD places in Texas closing would reward Ted Cruz.

    • rd says:

      Actually, I am waiting for the moment when the retired folks in the red states figure out that THEY are the deadbeats their elected representatives are talking about and that their elected representatives want THEIR SS payments prioritized lower than Treasury debt on Nov 1. They are going to be really surprised when they figure out it is not just blacks, hispanics, and moslems in the cross-hairs.

      • Iamthe50percent says:

        They won’t. When it happens Fox News will blame the Democrats and they will curse Obama.

        Trust me, I know these people.

      • AmyM says:

        Yes I can’t wait to see what happens when they don’t get their Social Security checks. (True, they will blame Obama and say he’s picking on them.) But maybe more people will give a damn when they see it directly affecting them.

    • willid3 says:

      yes!

    • Internet Tourettes says:

      It’s not the cuts (although I would vote for DHS and the military) its the “contra revenues.” End the stupid tax subsides to overly profitable businesses. Does big oil need favorable tax treatment for exploration when they are bringing in record profits. Carried interest treatment of income for hedge fund managers (sheesh!). Indirect subsidies for Walmart whose business model is based on paying their employees a non subsistence wage and having worker dependent on public welfare. The corporate welfare state is killing the economy and is ultimately undermining the competitiveness of US businesses. Walmart is sucking wind in Mexico, Ford, GM, and Chrysler cant sell cars successfully in Japan, and no american company has successfully entered the African market. The most successful American companies are the ones not dependent on preferential government treatment like Apple (you could argue HB-1 visas though but I don’t know how much they take advantage of it).

      • willid3 says:

        well in directly they all do take advantage of it. even if they dont directly. after all, if you out source to a company that does, haven’t you also take advantage of of H1B visas?

  2. MidlifeNocrisis says:

    “… massive cuts, I say we apportion them relative to how the state’s voting block voted.”

    I don’t think that will work. Using that plan, the “conservative” South Dakota ranchers who lost livestock during the snow storm a couple of weeks ago won’t get their USDA disaster benefits/payments.

  3. Frilton Miedman says:

    My question – How many of those promoting default are in the pockets of campaign donors that lost HUGE money in 2012?

    I seriously believe certain members of the GOP are working at the behest of entities that are attempting to regain an ROI on lost hundreds of millions invested in 2012….

    As with the banks in the CDO scam, they position themselves strategically in short positions, covered by CFMA anonymity – then – have their political puppets default to collect on those shorts

    Money has to be taken out of politics, bribery is NOT “free speech”.

  4. > Lets have a vote

    Amen. One wonders if a lot more damage is going to be done than people imagined before something is cobbled – and I mean cobbled, because the proposals being tossed out are all short-term solutions – together. The unimaginable seems to be rapidly morphing into the imaginable. We shall see.

    Senators glum about prospects for debt deal (WAP0)

    http://goo.gl/Z7wIS9

  5. postpartisandepression says:

    They are going over the cliff gentlemen – there is no way the republican house is going to get this done. I would say you need to hold onto your hats. And even if they don’t this Thursday we are talking about doing this all again in Feb. Can we have a vote of no confidence , declare a national emergency and dissolve congress please?

    I don’t know who they are working for – the Taliban or Osama bin laden come to mind though.

  6. Orange14 says:

    I would force Louisiana to rebate the $12B or so they received to improve the flood control in New Orleans after Katrina. Why shouldn’t the fine citizens of Jindal country pay for their own infrastructure?

  7. jackshelp says:

    China: Time to deAmericanize the world
    “It is perhaps a good time for the befuddled world to start considering building a de-Americanized world.”
    “The world is still crawling its way out of an economic disaster thanks to the voracious Wall Street elites,”
    “A self-serving Washington has abused its superpower status and introduced even more chaos into the world by shifting financial risks overseas, instigating regional tensions amid territorial disputes, and fighting unwarranted wars under the cover of outright lies,”
    http://www.businessweek.com/articles/2013-10-14/chinas-state-press-calls-for-building-a-de-americanized-world

  8. Angryman1 says:

    What is funny is, “debt default” won’t help the fiscal situation at all. The contraction it would bring would destroy the US economy and hike real debt even higher.

    To me, debt default is open war on the capitalist system and rule of law. I think I will confiscate my neighbors property next to me. It has a swimming pool and a hot college coed. I will arm my posse and off we go!!!!! Why stop there? After people hear of my greatness, I will sweep the entire midwest, creating a empire Alexander would be proud of.

    Maybe even expand down to what was known as Texas and pay Ted “Juan” Cruz a visit!!!!

  9. mllange says:

    “The US is the most heavily indebted AAA rated sovereign, with a gross debt ratio equivalent to double that of the AAA median.”

    Raising the debt ceiling fixes this how?

    ___

    BR: Defaulting on the debt fixes this how?

  10. MayorQuimby says:

    I don’t think calling groups of people who want balanced budgets wankers is really called for. The true ‘wankers’ are the Republicans and Democrats who spent whatever it took to make themselves and the nation prosperous year after year after year and then kept dealing with the exponentially expanding bill by turning to the Fed. ENOUGH!

    • RW says:

      “Wanker” does not seem inappropriate when applied to anyone trying to force economic pain on a population for the sake of their own personal moral values. That this effort also displays ignorance of national accounting and economics as well as indifference to human suffering makes the label of Wanker seem a bit tame actually.

      In any case, even conservative economists and pundits agree a balanced budget is a really lousy idea; e.g.,

      Alex Tabarrok: The Virtues of an Unbalanced-Budget Amendment

      Ramesh Ponnuru – A Balanced Budget Amendment: Still a Terrible Idea

    • Iamthe50percent says:

      There are plenty of Economists that would dispute you. i.e. http://neweconomicperspectives.org/

      Way back around 1965 in Economics 101/102 I was taught that a rigid balance over an arbitrary one year period isn’t desirable. This goes back to John Maynard Keynes http://www.amazon.com/General-Theory-Employment-Interest-Money/dp/1467934925/ref=sr_1_1?s=books&ie=UTF8&qid=1381879933&sr=1-1&keywords=john+maynard+keynes. Balance over an economic cycle yes, but annually? No. And what kind of cycle? The eight year? The Thirty Seven year?

      Bottom line is, a sovereign nation is NOT a household or a firm.

      • “Balance over an economic cycle yes, but annually? No. ”

        Like certain versions of Marxism, Keynesianism sounds good in theory but runs afoul of human nature in practice.

        Show me ANY cycle where balance has been achieved, without a deficit-cutting phase? And if we’re not going to trim spending during an expansion, when are we going to do it? During the next recession?

    • willid3 says:

      so your ok with destroying US capitalism? since that could be the result. cause people have 0 tolerance for not being able to eat any more. since only 1% of the US works in agriculture any more. I am thinking the other 99% would put those who put then in that situation in a place they never expected to be. just saying

    • InterestedObserver says:

      I’d say the wanker description is less around the global objective (there are oodles of paths to a balanced budget if that’s the goal – and serious policy debates can be had on those paths) and more around the collateral damage inflicted by the specific tactics pursued in this instance.

      As it is, I think the wanker description is all too charitable to many driving this manufactured crisis.

    • willid3 says:

      i do like BR’s suggestion though. all who want to go over the cliff, their portion of the Fed spending in their gets cut first. that way no body can accuse them of advocating cutting some one’s spending when they advocate that

    • rd says:

      A good portion of the excess spending that led to deficits is military waste and fraud. The Tea Party refuses to address this. Similarly, there is a lot of waste in agricultural subsidies, another area they generally refuse to address, other than slashing food stamps.

      Social Security is not a problem yet and Medicare is just starting to be an issue. The Bush tax cuts, Iraq, Afghanistan, and the financial crisis explain virtually all of the deficit spending since the Clinton surpluses.

    • Concerned Neighbour says:

      Wankers is too light a term. Financial terrorists is a good deal closer to reality. The single worst thing they could do to expand the deficit right now is not increase the debt ceiling. They lost, and are now acting like children who didn’t get their way. If they want to change policy, instead of literally holding the country hostage, they can do it the old fashioned way by winning future elections.

    • MikeInSF says:

      …groups of people who want balanced budgets…

      Who are these people and which of them have actually proposed a balanced budget with real, believable numbers?

    • ami_in_deutschland says:

      A continuation of the sequester budget has already been approved by Senate democrats. The deficit is decreasing rapidly. Obviously this is something other than being about “balanced budgets.”

    • DeDude says:

      The people called wankers are the Teaparty folks who wanted to shut down and bankrupt the country unless the majority gave in to their demands of defunding ObamaCare. Only after the pools clearly showed that a huge majority disapproved of that kind of “shot grandma” blackmail was wildly unpopular, did they shift the goal to the more popular topic of deficits. The problem is that shutting down government and defaulting on the national debt will COST money and make the balancing of the budget even more difficult. On the other hand it would bring us closer to the right wing goal of government collapse. So yes they are claiming a “good” goal but in reality they are working directly against that goal – so what should we believe; their lying words or out own lying eyes?

  11. stonedwino says:

    Is Wall Street smart enough to finally cut off the lunatic GOP for good? What is going to take for people to realize you are better off with Obamacare and paying higher taxes than with dealing with lemmings that have suicide vests on? Jesus H. Christ on a stick…

  12. BennyProfane says:

    But, isn’t that the whole problem – that nothing really happened when our debt rating was marked down a while ago? Hell, the stock market continued to rally. And the apocalyptic disaster of the sequester really wasn’t all that bad, right? And, hey, life goes on with the government shut down, right? I know, I know, it’s all very bad stuff, and is just slowly killing us, but, can you blame these morons in Congress for ignoring the “OVER THE CLIFF’ disaster warnings? Sort of plays into their hands, right?
    Most of these radicals represent, well, excuse me, but, poor, ignorant white trash in places that really don’t matter anymore, if they ever did, so, what do they care? Ain’t got nuthin’, got nuthin’ to lose.

    • DeDude says:

      I agree. The wast majority of the damage is not immediate to them and its to complicated for these people to understand. We need to wait until Nov. 1 when social security checks do not arrive. Then they will finally get it.

      • BennyProfane says:

        And I agree with that. I wonder how many times this subject has been brought up by both parties in meetings. Who knows, secretly, the Dems may very well welcome that, hoping the Republicans will take 90% of the blame. it certainly would wake a lot of Fox viewers up.

  13. Concerned Neighbour says:

    Hopefully it won’t take a default to make the Tea Baggers come around to reality. That said, real consequences tend to be better motivators than hypothetical consequences, however likely the latter happen to be. Especially for those duller – whether by nature or purposeful neglect – tools in the shed.

  14. Petey Wheatstraw says:

    There is no way to balance the Federal budget. Hell — the Pentagon is unauditable. I’ll bet the rest of the Federal bureaucracy is just as bad.

    Tea Party squirrels and weasels were sent to DC to destroy the Federal Government, and they are planning to have at it.

    So, they will default on debt denominated in our own (completely fiat), currency. Smart.

    If we’re lucky and the trend holds, they’ll fuck it all up before they fuck it all up.

    • “There is no way to balance the Federal budget. Hell — the Pentagon is unauditable. I’ll bet the rest of the Federal bureaucracy is just as bad.”

      Non sequitur. The total income and outlays are well known even if the details are obscured by bureaucratic misdirection.

      Furthermore, if there was genuinely a will to balance the budget, there would be a way. There are any number of experienced corporate cost-cutters who could be engaged to root all the least-useful expenditures out of the budgets. It’s just a matter of establishing priorities — and then not going back for dessert.

      The real problem I have with the current fiasco is that, as far as I can tell, neither side is genuinely interested in addressing the real problems this nation faces. Everyone just wants to lob verbal grenades in front of the camera for a while, and then tacitly send the pork home as usual.

      • willid3 says:

        while cost cutting is one way to get a deficit under control. in business it will also lead to collapse if you dont get sales up. cause you can’t cut your way to a profit for very long. so given that, i suspect that any real business person, would look at increasing sales (aka revenue). first

  15. kek says:

    Fitch is grandstanding. So predictable. Does the big money even care about ratings from the agencies?

    Washington is a sewer. The Government wanker machine is out of control with the taxpayers money, bloated, stupid, and willing to screw the future of the country. Better off with Obamacare? Who knows??? I doubt anybody read the 2471 pages. Also, why doesn’t congress eat their own cooking w/ Obamacare?

  16. Bob K. says:

    This is all part of the show. 25% of this debt is payable to ourselves. 10% of the revenue the govt takes in serves the debt. Default is never in play, it is all theatre for the uninformed. This is really all about the establishment Republicans and Democrats trying to rid themselves of politicians that want out of the matrix. The vitriol is astounding.

    If you were a Tea Party Republican and you knew that they are gunning for you, and probably your last chance to get the drunk into rehab is to break his bottle before he beats you to death, why not go for it. The country will survive it (think 1920-21).

    Anybody with basic math skills knows this party is ending. Money velocity collapse caused by Fed bond buying and banks holding reserves is at an end game. Either direct cash infusions to the sheep, or more reckless lending. Either way inflation is a coming, and the little people are crushed by inflation (and the banks will want to lend, no money for the peeps).

    But that shouldn’t worry any of the people commenting tonight, you have assets that will rise with this curse. Poor people are screwed. Look at the soft commodity space, it is all lifting ahead of this deal that will happen. The same commodities that people eat.

    • MarW says:

      Agreed…many of the folks here are foolishly trying to assign blame for a symptom rather than looking at the root cause of the issues. And they are drinking from their preferred cup of ideology to find the party to blame – after all, it’s far easier than examining your own beliefs. The party is nearly over, and the people who deserve the hangover – free-spending politicians and their banker friends – are likely to avoid it.

      Many of the posters here would benefit from reading the Creature from Jekyll Island.

  17. Angryman1 says:

    The US has historically, never really balanced its budget. Overall spending has increased since the Great Contraction because the demand is high. The last 30 mainly because of wage decline. We need something to power the economy and debt became the driver.

    Washington and Hamilton were freaking out over the debt in 1795. Jefferson said relax, hit the pipe and chill. If you build it, it will be financed.

  18. 4whatitsworth says:

    Don’t get your panties in a bunch, politicians are doing what they do. Wasting our time and money! I would not be surprised if the entire thing is not scripted. Watch as the senate saves the day and we get thumbs up vote from the house.

  19. intlacct says:

    I would LOVE to see the Social Security folks get in line with the kids on SNAP and the previously uninsured for years.

    I have HUGE investments in Treasuries so I am very concerned.

    I’m a bit surprised that no one on that side of the aisle (esp. Boehner) seizes the opportunity to break the back of these Tea Party creatures. Just need to have the SS checks stop flowing, market decline of 20%, etc. They seem set up for a ‘McCarthy moment’. “Have you no decency at last?” (I can’t recall the Senator’s name who asked that.)

  20. farmera1 says:

    I truly believe these people in the TEA PARTy are anarchists. Although they have no idea what they are messing with, anarchy will be the end result. Terrorists is also another apt term.

    I really wonder when the dead beat old people wake up to find no Social Security checks what will they do?

    How to destroy the world’s richest sovereign nation with the world’s reserve currency. Didn’t think it could be done. Destruction is hard work. But the Tea Party and their supporting cast of enablers have it nailed.

  21. intlacct says:

    Perhaps the defaultistas don’t understand that President Obama will continue to be African American even after the default.

  22. S Brennan says:

    Sounds dire, but it’s worth it, [at least that's the bipartisan consensus], if we don’t go over the cliff we would have lost the individual mandate which forces slobs [about 20% of workers] who don’t have insurance through their company to subsidize those who are too sickly to get insurance, while 80% of workers rides for free. Wee-hee, it’s fun to be a sanctimonious free rider!

    This is worth fighting to the death for:

    http://www.nytimes.com/2013/10/13/us/politics/from-the-start-signs-of-trouble-at-health-portal.html?pagewanted=all&_r=1&

    And if you don’t think the individual mandate is fighting to the death for…you must be a low information, tea-party, birther type huh?

    One last thing, Barry, are you really defending the rating agencies? Sherman, set the WABAC machine to …oh, never mind…pass the Kool-Aid

    • Not defending the rating agencies, but pointing out the consequences of the Tea Party Tantrum.

      • Irwin Fletcher says:

        The fight is about ObamaCare, not the budget. All on this post miss the point of the entire fight.
        Conservatives are fighting to stop ObamaCare. Unfortunately, Republicans are caving in now and all will be well again in Oz. ACA will be implemented on time (what a joke), crammed down our throat, debt ceiling raised, deficits continue to soar, and the milk keeps flowing. Welcome back to the creative world of total wealth redistribution.

  23. “The US is the most heavily indebted AAA rated sovereign, with a gross debt ratio equivalent to double that of the AAA median.”

    This is the real problem, but of course those who bludgeoned R&R over flagging debt/GDP ratios as a critical issue will have trouble digesting why a nation’s credit rating might have anything to do with its debt/GDP ratio.

    Finally, the real issue isn’t whether we miss a payment in the short run. Plenty of homeowners and other debtors go through that. The real issue is whether we can actually service the debt in the long run… I think it’s an open question how much longer we can go on without destroying the financial markets in order to prevent interest rates from rising to the point where the U.S. has no choice but to default.

  24. tdotz says:

    To the TP’s the world outside their district is merely a rumor. They know they will have Fox News leading the blame campaign assigning any consequences of a default to Obama.
    In their very special districts the more radical they are, the safer they are.
    They are having a taste of power the likes of which they had never even dreamt.
    And if history is any guide, they will have long careers in Congress.
    Don’t you see, it’s a win-win!

    • DeDude says:

      The interesting part is that whereas the TP’s will get reelected many of the less extreme GOP house members will be in danger of losing to a democratic opponent. Yet many of them are showing “party loyalty” and refusing to unhook the TP lunies.

  25. rhkaplan says:

    From reading all these posts I surmise that the US economy can only function due to deficit spending by the federal government and that seems fine to the comment posters on this blog. What is hilarious is that the Tea Party is vilified by TBP posters because they want change by when Obama wants change he is glorified. The problem isn’t defense spending, which has grown every year under Obama (not noted by the mainstream media) but all the social programs which account for almost all of this past fiscal year’s revenue of the federal government. Military spending is discretionary as defined inthe Constitutions. SS, Medicare, Welfare, SNAP…. aren’t defined anywhere in the Constitution but are considered mandatory spending. Something wrong with this picture,

    • You have drawn no such conclusion, you are merely repeating your prior beliefs.

      You are entitled to believe whatever you want, just don’t make the claim that you are analyzing what posters say

      #fail