S&P Downgrades USA's Credit Outlook

I know this happened a couple of days ago, but what are the ramifications of this? Will this cause interest rates to rise? I know China is on the Treasury to protect bondholders against a plunging dollar...how is this all going to play out? Is it time to start stockpiling canned goods and seeds? The University of Texas just bought $1 billion in gold boullion...do they know something we don't. I am no economist at all and am really curious as to what this all means, and if there is a way out. Please, let's not turn this into a pissing contest.

 

Re: S&P Downgrades USA's Credit Rating

That's factually inaccurate.

 

Actually, you are right. It changed the outlook, not the rating. My questions still apply.

 

Re: S&P Downgrades USA's Credit Rating

Link for the UT story? And correcting the thread title would also be nice.

 

Re: S&P Downgrades USA's Credit Rating

You need to correct your initial title, Carlton. Changing your latest doesn't change the thread title.

 

The ramifications are the same as they've always been, imo. Americans and their politicians are so desperate to believe that the prosperity of the 1990s and 2000s was some sort of natural right that they'll keep borrowing like madmen to try to keep up appearances and delay the inevitable correction. The longer they delay it, the worse it'll be when it gets here.

There's a time to borrow and inject money into the economy. It's very early in a recession when you don't want the economy doing damage to itself that will cost more to fix in the long run (i.e. maybe a $100k government expenditure keeps a factory from shutting down entirely, when it will cost $200k to restart the factory later when the economy starts growing again). We are way past that point, and all we have now is people trying to live beyond what we can afford as a country on loans that we'll have to pay back with interest.

 

Do you think we should increase the debt limit again? This seems like a cycle that is never going to end. When Bush was president the Repubs all talked about how raising the debt limit was critical, while the Dems talked about how it was a failure in leadership. Now they are both taking the exact opposite approach as they had during the last administration. It seems like both sides are perfectly content to gamble with our future, depending on who is in the big boy seat.

 

No. I do not think we should increase the debt limit and I think we should undertake immediate austerity measures to reduce the debt (not just the deficit, the debt). It'd suck hardcore for the economy in the short run, but it'd be better in the long run.

 

http://www.bloomberg.com/news/2011-04-16/texas-university-takes-cue-from-kyle-bass-to-hold-1-billion-in-gold-bars.html

 

Debt would be a lot more acceptable if it were spent correctly. The problem is that, from local villages to the federal government, all spending is focused on now, now, NOW!! Give me immediate results or have a seat. As much as we lionize democracy, it can kind of suck sometimes. Majority rule elections don't measure voter intensity. And most voters are brutally uninformed. Democratic elections are the most devastating kind of market failure.

I was thinking about this yesterday in my car. What if we went back to the beginning of the "war on drugs," and took all the money we've spent on it through the years, and instead invested it all on early-childhood education then and there. Today we would have less drugs and less crime, I bet, by a considerable amount.

 

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