05 August 2011

Standard and Poor's Downgrades US Long Term Sovereign Debt From AAA to AA+

"And remember, where you have a concentration of power in a few hands, all too frequently men with the mentality of gangsters get control. History has proven that."

Lord Acton

It appears that my suspicions about a hidden agenda and undercurrent in today's trade were correct. There were prints of something significant but undisclosed all over the tape, yesterday and today.

The official line will try to downplay this next week, and they may attempt to tinker with the market to support that story line. They have positioned Treasuries and the metals to help them do this. They did not quite succeed with gold.

It appears that this information known earlier on by at least some market participants, as the "government prepared for the downgrade" as reported to ABC news. S&P delayed the release this afternoon as the Treasury found 'a 2 trillion mathematical error' in S&P's figures.

Are you kidding me?

The US rating remains unchanged at Fitch and Moody's. This may ameliorate the effects of the downgrade.

There are no coincidences in politics, and international financial ratings. Watch and see how they never 'waste a crisis.'

The Governance of Money - MacroBusiness

There are some ways in which this crisis could be seen not so much as a financial crisis, but as a prelude a much deeper conflict of governance. This time it is not North versus South, but along the borders of wealth and power. Still, the lines of conflict are drawn along ideology once again, and what it means to be a human being with equal rights and obligations.

The currency and class wars will intensify.

United States of America Long-Term Rating Lowered To 'AA+' On Political Risks And Rising Debt Burden; Outlook Negative

· We have lowered our long-term sovereign credit rating on the United States of America to 'AA+' from 'AAA' and affirmed the 'A-1+' short-term rating.

· We have also removed both the short- and long-term ratings from CreditWatch negative.

· The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics.

· More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011.

· Since then, we have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government's debt dynamics anytime soon.

· The outlook on the long-term rating is negative. We could lower the long-term rating to 'AA' within the next two years if we see that less reduction in spending than agreed to, higher interest rates, or new fiscal pressures during the period result in a higher general government debt trajectory than we currently assume in our base case.

Read the full report here.