Tag Archives: Standard & Poor’s

Aaa – aaa – PLUS! Gesundheit!

Rating agencies dominate the financial markets and the news these days. Standard & Poor’s recent downgrading of French, Spanish, Austrian (and other, but not German) government bonds from “AAA” to “AA+” caused waves in media and markets even before they were official. But maybe it is much ado about nothing. Bond yields didn’t go up in France and Spain, as markets have seemed to downplay the downgrade. Maybe common sense is ticking in? Because, what is it that these rating agencies can? They could rate junk financial instruments “AAA” before the financial crisis. Standard & Poor’s rated Lehman Brothers “A” in September 2008 (just before Lehman went bankrupt). This rating … Continue reading

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US of AA+

Rarely has a rating agency’s rating of a single country been met with such anticipation and followed by so much commentary. On August 5, Standard & Poor’s downgraded US long-term sovereign debt from the maximum of “AAA” to “AA+” adding an “Outlook Negative” to the picture. As mentioned all over the press, this is the first time to happen. What is particularly interesting about the downgrade is the motivation. Surely, United States has a huge public debt—of a size that causes even the most Keynesian-minded economists to take it seriously. But the motivation is barely economic at all. As seen in “Research Update: United States of America Long-Term Rating Lowered … Continue reading

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Can the US Go Bankrupt? Yes, of course it can

A few days ago, the rating agency Standard & Poor’s changed its rating of US government bonds from the usual (highest possible) AAA to a similar one, but with a “negative outlook warning”. This caused havoc around the blogosphere and in policy circles. Some claimed that this was an untimely private, and politically motivated, action serving to undermine public spending programmes in the US. In any case, the market didn’t take much notice, as the interest on government bonds moved little. “Poor Standards” as Paul Krugman called it. He may be right. After all, S&P did funny ratings in the past (remember house-backed securities pre 2007?). And, by the way, … Continue reading

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