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If the dollar was a standard money, the US would have been in default since long ago. If it starts to be questioned then I guess that only means troubles for everyone
I would think it would be a big deal if US bonds lose their AAA rating. Although it is true that it is unlikely that they would go into default instead of paying with printed money. I don't think there is something inherently wrong with being in debt as it is a better alternative than paying for everything straight up but in turn with the bailouts and the not so cheap reforms and projects obama has the whole thing is very close to going out of control. I think obama choose a bad time for the reforms he wanted to make. IMO it would have been wiser to leave those things for a time when the economy is better and can afford them. At the very least changes could have been more gradual, not outright increase spending to an apparently unknown amount. Obama should have focused on putting the economy back on track first. Basically, make the money and then use it not the other way around.
However, that does not lower the amount of debt, it lowers the interest on state bonds while increasing inflation - that is very bad, because it can happen that inflation is higher than the interest on state bonds then, and then really nobody would buy them anymore as buying them would result in a deficit instead of profit.
I have a hard time understanding the big deal about the downrating. My attention is focused on the people who determine the rates, however. These individuals have proved their own incompetence one too many times. For example, what were rating agencies saying before the Great Recession hit? "Everything is A-OK! Don't worry! The markets are doing swell!" Then 2008 came and showed these agencies just how wrong they were.
The chief reason why companies ship jobs overseas is because of labor costs. Foreign labor is much cheaper than US labor. In addition, companies no longer have to comply with the stricter US safety + environmental standards.
Yes, it's true that these ratings are not very reliable, but that's absolutely not important for the situation. As long as investors believe in the ratings, they are important.
About the interest: Lately, US 10yr treasuries pay 3.99% interest rate, which was increased only because S&P changed outlook to "negative".
Last edited by Roflkopt3r; June 03, 2011 at 02:17 AM.
Moody's consider lowering US credit rating
Mainly because another inability to pay might occur in two months, when it could again happen that republicans and democrats won't make a compromise about the budget.
partly why the reason that the U.S. is broke:
~50% of our population (the poor or near poor) pays no taxes + the rich % of population pays no taxes + the financial mess/breakdown of "too big to fail businesses" + the wars/involvement in middle east and north africa + regulation and corporate taxes further driving businesses overseas and making it UNaffordable for the businesses still in the U.S. to hire workers too + the entire world's economic mess and being broke too = U.S. is very broke (well, going to be, anyways, lol)
as for "raising the debt ceiling", this is a massively contentious political issue in the U.S., so who knows if we'll do it or not, if moody lowers the U.S. rating or not, etc...
what's the point in raising taxes if most of our population (poor+rich) doesn't pay any taxes anyways?
no, what we really need is ENFORCEMENT of paying taxes, and than we can see if we still need to raise taxes or not, lol.
Last edited by HegemonKhan; June 03, 2011 at 04:17 AM.
According to my poli sci professor, if that debt ceiling doesn't get raised we are fucked...default on our loans for the first time in our history which will make us seem unreliable and that of course will be followed by a dramatic decrease in the value of the dollar...hurray!
The quandary continues. Republicans want no more taxes but lower welfare (is that even possible in the U.S.? omfg), Republicans say no cuts but higher taxes for the rich.
If they cannot find a compromise in three weeks, the U.S. will be unable to pay their bills.
As I used to say here before, both have to be done - cuts on spendings as well as increasing taxes. Yet especially decreasing spendings appears risky to me, as it endangers economy. And the U.S. have finally to cut on their military... It's bigger and more expansive than during cold war, cmon. Obviously arms industry would be severely opposed, so I guess nothing will happen.
The U.S. are pretty much done for imo. It's an unstoppable descend.
Last edited by Roflkopt3r; July 10, 2011 at 02:51 PM.
I really can't see the entire Republican Party going along with this farce too much longer without risking SERIOUS damage to them in 2012.
Last edited by Franckie; July 10, 2011 at 09:19 PM.