S&P

This article is a contribution to 'Is There Anything That Can Be Done? A TNR Symposium On The Economy.' Click here to read other contributions to the series. Most adults know that there is no Santa Claus. They should also know that there was no stock market crash associated with Standard and Poor’s downgrade of U.S. government debt. However, because powerful interests want to spread misinformation about the downgrade, people are likely to be much better informed about Santa Claus.

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Tea and Unsympathy

[Guest post by John Judis] When Standard & Poor’s issued its statement downgrading America’s long-term credit rating from AAA to AA+, it said it based its decision on two factors: first, “the difficulties in bridging the gaps between the political parties over fiscal policy,” and second, because the “fiscal consolidation plan that Congress and the Administration agreed to … falls short of the amount … necessary to stabilize general government debt burden by the middle of the decade.”  In the longer exposition of the decision, S&P singled out the “political brinkmanship of recent month

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In a nutshell, because it worked: Asked about the S&P assessment, 71 percent of Americans called it a fair one. On the blame front, 36 percent say the GOP is culpable for the downgrade, 31 percent blame Obama and his fellow Democrats and 22 percent say it’s both sides equally. So first the House Republicans held the debt ceiling hostage. It's utterly clear that this which caused S&P to downgrade U.S. debt: A top official at rating firm Standard & Poor's said Friday the company's decision to downgrade U.S.

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Nate Silver gently suggests the S&P analysts may not be terribly bright, brainwise: What factors is S.&P. looking at when it rates sovereign debt? A country’s debt-to-G.D.P. ratio? Its inflation rate? The size of its annual deficits? S.&P. does look at each of these factors. But it also places very heavy emphasis on subjective views about a country’s political environment. In fact, these political factors are at least as important as economic variables in determining their ratings. For instance, the S.&P.

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There is an absurd quality to the debate over the S&P downgrade that captures the perverse incentive structure of our political system. House Republicans successfully played chicken with the debt ceiling and have vowed to continue doing so. As a result S&P downgraded Treasury debt: The "conclusion was pretty much motivated by all of the debate about the raising of the debt ceiling," John Chambers, chairman of S&P's sovereign ratings committee, said in an interview.

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On Wednesday morning the managing directors of Wall Street’s biggest bond rating agencies lined up in front of the House Financial oversight committee. To the administration and the Treasury, these men currently represent their worst nightmare. In the last two weeks, Moody’s, Standard and Poor’s, and Fitch have all threatened to downgrade America’s triple-A debt rating, a move that would cost the government billions in raised interest rates and spark disastrous macroeconomic consequences for the country.

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When the really true history of the financial collapse is written there will be a special place of infamy for the three major rating agencies: Moody's, S & P, and Fitch. I'd written about them before the system-wide disaster and during the weeks and months when American capitalism was truly on the ropes. Some sectors of the economy got their comeuppance; some didn't, getting away wholly unpunished and gloating about their escape by claiming that their lies about companies and public bonds were protected by the First Amendment. Free speech has insulated many rogues and criminals.

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If you're on the web you probably know already that the Dow industrial index was down nearly 8%, the NASDAQ 8 1/2% and the S&P more than 9%. This is after all the help that anybody can think of giving has already been given and the international aspects of relief have been taken. Some commentators are still arguing whether it's a recession. This is psychopathic denial, psychopathic delusion. Of course, it's already a recession. And please don't ask whether it's a depression. I believe it is.I don't know how many of the companies on the American exchanges are trading below their cash.

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