S&P Downgrades US Debt

[Dunk]

http://money.cnn.com/2011/04/18/markets/markets_newyork/index.htm?hpt=T2


NEW YORK (CNNMoney) -- U.S. stocks cut some losses late Monday afternoon, but still finished the session sharply lower after Standard and Poor's cut its long-term outlook (http://money.cnn.com/2011/04/18/news/economy/us_credit_rating_outlook_lowered/index.htm?iid=EL) on U.S. debt to negative.From S&P


We believe there is a material risk that U.S. policymakers might not reach an agreement on how to address medium- and long-term budgetary challenges by 2013; if an agreement is not reached and meaningful implementation does not begin by then, this would in our view render the U.S. fiscal profile meaningfully weaker than that of peer 'AAA' sovereigns.Is this crack foreshadowing the next crises?

[KC]

They haven't downgraded the debt - yet. They have simply changed its outlook to "negative". If its debt was downgraded you would have much more serious problems than a small tick in the market.


S&P kept its "AAA'"-rating on the world's largest economy, but said it was concerned about the United States' ballooning deficit.

[ckaihatsu]

This is the continued whip of counter-revolution, now manifesting as monetarism in the world's lead economy. (It began with the imperialist militarist interference in Libya's popular uprising, countering the upsurge of rebellions in the Arab World.)

[graymouser]

This has to have been political maneuvering, as it basically amounts to a threat in the current budget dispute: start cutting the deficit or else.

Of course, for the ruling class the wars (three official, more others) are more or less off the table for budget cuts - meaning the austerity has to come from systems that are already stretched to their breaking points. And naturally, taxing the rich would be beyond the pale. Simply amazing the shit that passes for mainstream politics in this country.

[ckaihatsu]

---





This pretty much. The US is a post-industrial society that exports capital goods and imports consumer goods, like the late USSR. There is some domestic manufacturing of consumer goods but labor costs drove production to where it is cheapest, allowing specialization in economic calculation and capital goods production.

This process however has ended with the crisis that began in 2008 as third world labor costs rose too much to support present production patterns and first world incomes fell too much to support present present consumption patterns (or rather, the debt instruments used to support high consumption patterns with falling income collapsed).

Now it's a reorientation toward a more global cosmopolitan bourgeoisie and a general international proletariat rather than the national proletariat of the Keynesian era who were supported by government programs and reformist unions.

[Dunk]

They haven't downgraded the debt - yet. They have simply changed its outlook to "negative". If its debt was downgraded you would have much more serious problems than a small tick in the market.

:blushing: I'd edit the title of the thread to "S&P to downgrade US Debt?" but I don't know how, and suspect only a mod can do it.

[ckaihatsu]

http://wsws.org/articles/2011/apr2011/pers-a23.shtml


Question mark over role of US dollar


23 April 2011

The announcement by credit rating agency Standard and Poor’s that it had downgraded its outlook on US debt to “negative” has sent a shudder through global financial markets. The decision means there is now a one in three chance that US debt itself will be downgraded over the next two years—an event without precedent.

More than the state of the US economy and government finances, however, is being called into question by the S&P decision. With US debt considered the safest in the world, any downgrading means that the role of the US dollar as the world’s reserve currency will be severely undermined, if not ended altogether.

[...]

The statement pointed to one of the main causes of the present aggravation: the contradiction inherent in the dual role of the US dollar—as both a national currency and world money. In order to try to boost the US financial system and cover its trillions of dollars in losses—as well as to strengthen the position of American banks as they battle for global market share—the US Federal Reserve has provided hundreds of billions of dollars in cheap credit through its so-called quantitative easing program.

This has, however, created major problems for other economies. Money has poured into their financial systems, leading to inflation in food and other commodities as well as creating asset bubbles, especially in real estate.

[...]

For the past 40 years, the international financial system has nevertheless operated with the US dollar acting as world money. It has only been able to do so because of the relative economic superiority of the US over its rivals. But that superiority has now been undermined, and the international financial system is resting on the currency of one of the world’s biggest debtors.

The dollar, however, will not be replaced by some new form of international money, devised by the BRICS group or any other combination of capitalist powers. On the contrary, the ongoing financial storms and crises will see an increasing fracturing of the world economy into rival national currency and trading blocs, just as occurred in the 1930s. And like then, the outcome of these divisions will be deepening economic and political conflicts, leading ultimately to war.

The only way to prevent such a global catastrophe is through the development of an international political movement of the working class, based on a revolutionary program to overturn the outmoded capitalist order and its conflicting “great powers”, and to rationally utilise the world’s productive forces within the framework of a consciously planned international socialist economy.

Nick Beams