Simon Johnson: Behind The S&P Warning on the Deficit

The New York Times:

Standard & Poor's announced on Monday that its credit rating for the United States was affirmed at AAA (the highest level possible) but that it was revising the outlook for this rating to "negative."

In this context, that was a warning "that we could lower our long-term rating on the U.S. within two years" (see Page 5 of the report). This news temporarily roiled equity markets around the world, although the bond markets largely shrugged it off.

Read the whole story: The New York Times

Comments

[themodernleader]

08:37 AM on 04/22/2011

     I commend the honorable Simon Johnson for revealing that he is a member of the CBO Panel of Economic Advisors  that meets only once a year. It must be esssentially ceremonial.     I was puzzled why a candid, honest expert  who must knows better than I how broken and dysfunctional the American economic, financial system is would never utter a word of using public enterprise to place 30 million, bored, desperate and dangerous humanity to work on maintenance work of this declining nation.
   It is a fair question to ask whether self-censorship is present with his brilliant analyses and whether self-censorship is not operating throughout the intellectual community about the condition of the stagnation and decine of American industry, technology and competence.  New ideas to deal wth our perilous position are not forthcoming.  There obviously is a conspiracy of silence among those leaders holding the responsibility for the fate of our nation.  Something smells rotten in Denmark.

[beherenow54]

03:00 PM on 04/21/2011

".....The company still seems hampered by some of the same weak analytics that contributed to its misreading of subprime mortgages and associated derivatives. Weak analytics? Hardly. It was motivated by an agenda then, and by its own agenda now. We should never trust what the S&P analytics show. Misreading the CDOs and subprime mortgages? I don't think so. It ignored all the warning signs because it was supposed to.

[clearthinker16]

02:33 PM on 04/21/2011

now after all this they are finally seeing this, come on

[Robert Cantor]

02:12 PM on 04/21/2011

ty, Mr. Johnson for your post. S&P did not publish analysis, the made public political opinion, devoid of statistical analysis 'things will be bad if they get worse'

[loki]

01:34 PM on 04/21/2011

I have a feeling this is another Ivy Greed Capitalist trick to get the gov to lay off them so they can go back to raping American raw. They manipulate the info and use it as blackmail to get the gov to lay off, when their personal political puppets cant do anymore to help them cause the public is so outraged. The big Wall Street and Banks are nothing less than super Mafia Criminals, worse even, and they toss their weight around in ways that make Mafia Dons blush with envy. We need to end the Ivy Greed Capitalist era of power before it totally ends us. Charles Ferguson is pretty much on target when he talks about how insanely corrupt and out of control the top 1% is these days, and how they feel they have the right to lie, steel, pillage and rape everyone and anyone as long as they can prosper. That is not capitalism, that is crime.

[joyce628]

01:23 PM on 04/21/2011

Is this the same S&P that gave the false AAA ratings for the Wall Street firms that contributed to the near total economic collapse of our economoy? Just wondering out loud...

[Pamski]

01:35 PM on 04/21/2011

Yep.

[Pod-gers]

01:18 PM on 04/21/2011

Unbelievable, but true, true, true....
http://www.rollingstone.com/politics/news/the-real-housewives-of-wall-street-look-whos-cashing-in-on-the-bailout-20110411?page=3
Even more disturbing, the major stakeholder in the Bahrain bank is none other than the Central Bank of Libya, which owns 59 percent of the operation.

In fact, the Bahrain bank just received a special exemption from the U.S. Treasury to prevent its assets from being frozen in accord with economic sanctions.

That's right: Muammar Qaddafi received more than 70 loans from the Federal Reserve, along with the Real Housewives of Wall Street.

[FR713]

02:16 PM on 04/21/2011

Thought you said you supported Obama.

[MOMSROCK]

01:07 PM on 04/21/2011

YIPPIE !!!!

Estonia has better credit rating than United States

S&P lifts Estonia's ratings outlook to positive - CNBC

http://classic.cnbc.com/id/42702403

[Robert Cantor]

02:13 PM on 04/21/2011

Dopie!

[MOMSROCK]

03:08 PM on 04/21/2011

Sarc

[dweezil52]

01:02 PM on 04/21/2011

So when exactly did S&P discover "integrity"?

[Robert Cantor]

02:13 PM on 04/21/2011

In somebody else? they figured in was rare and tried to bundle it into a CDO?

[Veganie]

12:54 PM on 04/21/2011

Who cares about the national debt, foreigners and investment bankers mostly. This country has plenty of assets that far outweigh the debt; otherwise, investors would not still be buying U.S. bonds. Why not sell Alaska and Texas and pay off the debt?

[blindhammer]

12:55 PM on 04/21/2011

Uh. The Federal Reserve is buying US Treasuries now ... ... ...

[dweezil52]

01:03 PM on 04/21/2011

Ah,yes, the marvels of a fiat currency. You can walk thru walls.

[MOMSROCK]

01:08 PM on 04/21/2011

70%

[FR713]

02:20 PM on 04/21/2011

You should send this comment to Obama for his next campaign speech.

It would be the first time he has told the truth.

By the way, those of us here in Texas would be proud to buy Alaska and Texas.

If you like your government check you better hope Obama does not make such an offer to sell.

[John Mainstream]

12:46 PM on 04/21/2011

S & P is saying stop the spending. $5/gallon gas is saying that we just can't print money.

[Robert Cantor]

02:17 PM on 04/21/2011

If inflation or devaluation was causing $5/gallon gas then ALL US imports would rise (they aint) and gas prices would rise world wide they aint.

There4 U R Wrong. buh-bye!

[KOisGod]

12:44 PM on 04/21/2011

No, it's not the United States of America that's broke; it's the gamblers on Wall Street who keep going to the Fed to bail them out of jail so they can run back down to their 24-7 365 betting casino to lose more of our tax payer dollars.

Then, they run back to the Fed, who cover their loses and give them more.

http://www.rollingstone.com/politics/news/why-isnt-wall-street-in-jail-20110216

[MikeNice]

12:56 PM on 04/21/2011

The U.S. is the richest most powerful country in human history. The public debt is out of control now because of policies that siphon our wealth into the hands of a relative few; you site one of these policies. All serious deficit reduction proposals should start with these assumptions, but in fact we are heading in the opposite direction.

I think it is very telling of the state of our media, that some of the best investigative journalism into the financial crisis comes from a Rolling Stone's reporter.

[KOisGod]

12:59 PM on 04/21/2011

Thank you, precisely.

[MOMSROCK]

01:10 PM on 04/21/2011

But there are others out the that did not make into MSM like Rolling Stones did - I agree with you

[edwcorey]

12:42 PM on 04/21/2011

The game is rigged, and S&P's machinations are suspect. S&P is paid by the firms it monitors, by law. It obviously didn't bite the hand that fed it while Bush was in office. But since the government is lending money to the welfare bankers at near-zero interest, it's in those companies' interest to turn around and buy, with the government's own money, government debt when the government is forced to borrow at higher interest. How long must the American people walk around with a "Kick me" sign on their backs?

[Morgantheaxe]

12:42 PM on 04/21/2011

Budget Breakdown for 2012
Defense-related expenditure 2012
Budget request & Mandatory spending Calculation.


DOD spending $707.5 billion Base budget + "Overseas Contingency Operations"
FBI counter-terrorism $2.7 billion At least one-third FBI budget.
International Affairs $5.6–$63.0 billion At minimum, foreign arms sales. At most, entire State budget
Energy Department, defense-related $21.8 billion
Veterans Affairs $70.0 billion
Homeland Security $46.9 billion
NASA, satellites $3.5–$8.7 billion Between 20% and 50% of NASA's total budget
Veterans pensions $54.6 billion
Other defense-related mandatory spending $8.2 billion
Interest on debt incurred in past wars $109.1–$431.5 billion Between 23% and 91% of total interest
Total Spending $1.030–$1.415 trillion


How many 900 dollar hammers and 2500 dollar toilet seats we could find in this budget if we just looked?

[FogBelter]

12:37 PM on 04/21/2011

It was a political statement from Wall Street, nothing more.

[ejhickey]

01:46 PM on 04/21/2011

If the Federal government starts on an austerity path, the sock market will probably drop. How was this a political statement from Wall street ? If it was it was one that will hurt them , not hurt them.

[FogBelter]

03:13 PM on 04/21/2011

If Social Security is turned over to Wall Street to run ... Americans paying into Wall Street every paycheck rather than paying into the Social Security Insurance program which, unlike Wall Street, guarantees a return, Wall Street wins. If Medicare is privatized, Wall Street wins. Austerity = Privatization. Privatization = Wall Street Win.