By Rob Beschizza at 8:27 am Tue, Aug 9, 2011
The agencies currently rating the U.S. below prime are Standard and Poor's and Beijing's Dagong.
Standard & Poor's Credit Rating for each country [Chartsbin via horhito@Reddit]
Your screenshot makes it look like our rating is lower-medium but we are actually ranked the same as China, who owns all our debt anyway, so I’m not too worried.
China, who owns all our debt anyway
China owns just over $1.1T of our debt, or roughly 7%. That’s more than any other single nation, but (for example) only about one-sixth as much as the US government owes to American bondholders.
China has fairly good reasons to hold as much U.S. debt as they do: they’re printing money to keep their currency cheap, and using the excess to buy our debt. They have excellent reasons to not want to hold too much more. Our economies are already linked enough that they aren’t, can’t be, and wouldn’t want to be the evil über-rentiers they’re sometimes made out to be.
Regardless of rating, short- and medium-term U.S. treasury bills are the only financial instruments I’m aware of with negative real yields (i.e., a negative expected return accounting for inflation). China’s debt isn’t exactly a risky investment, but no one’s paying them to hold their money.
China doesn’t own all US debt. They own 1.1 Trillion of it.
Just a clarification.
The US should be light blue for “High grade” – it’s only yellow because it’s being hovered over.
These ratings are supposed to be speculations and estimations, yet they are affecting market more than they should have.
Because the MBAs in the audience like quick and simple comparison codes and numbers.
People feel unsure about the US right now, that translates into them holding onto their money instead of investing it.
It’s really simple, actually.
I hate to comment just to echo the first comments but I’ll do it anyway – the graphic is deceptive.
God bless S&P. What other company would still have people pay ANY attention to it after the mortgage-backed security FAIL and the Lehman Bros. FAIL? The day after they downgraded U.S. bonds U.S. bonds were the destination of choice for money fleeing U.S. equities. And still, we continue to hear what S&P has to say . . .
As said before, the graphic shown in this post is wrong, and is pointlessly sensationalist. BoingBoing is better than this; please fix.
China is A1 with Moody’s, A+ with S&P and AA- with Fitch
I replaced the chart. Sorry about that.
For those wondering what happened, I uploaded a screengrab with the U.S. ‘selected’ to show the S&P’s outlook status (“Negative”). Unfortunately, that changed the U.S. color to a bright gold that looks similar to the color used for a lower rating.
Factual correction: Egan-Jones (which unlike the ridiculous Dagong is recognized by the SEC as an independent rating authority) has had the US at AA+ since July.
Even though the screen grab isn’t portraying the actual graphic (really, BB?), there is something to be teased out of this, that the socialist, high-tax (and therefore business-hostile) nations of Europe are better credit risks than the US. Even if the US regains its Prime rating (though it retains a Negative outlook, rather than Stable), those nations are already at the top rung.
Fixed it for me.
Whats wrong with the screen shot? It shows america as just below the highest level, thought thats what had happened. Funny that Dagong only givest the highest ranking to China and some of he scandinavian countries.
It’s a screen shot. And it’s been fixed now. Can we please all collectively move on to the issue at hand and stop talking about how Rob accidentially brushed your projected national egos’ toes with a feather? Because that’s all that broken screengrab amounts to.
Now then, the economy…
I am surprised that most of Europe is prime.
And why would you be? The countries that are “prime” all have highly stable governments, are among the 22 wealthiest countries per capita in the world (for reference, the US is #7-12, depending on whose figures you look at) and have relatively low (and, again, stable) unemployment rates. The ones that don’t have stable governments (e.g. Italy) or finances aren’t “prime.”
(Also, that would be “a good part of Western Europe,” not most of Europe.)
All the oceans of the world have more clout than Egypt.
To those neocons in the audience notice the number of “socialist” countries that have AAA ratings?
No need to play nice. Call the neocons / conservatives / tea partiers what they really are: political retards. There is no way for the US to climb out of debt without raising taxes. The conversation starts and stops right there.
I really don’t think we need to resort to generalised insults. I’ve looked at the Tea Party’s policies and its ideals, and I think you’ve crossed the line with your words.
Retards have feelings too. And many of them can grasp the simple facts that Tea Partiers can’t.
The Tea Party’s politics all fall into one of three basic categories: The illegal (usually a breach of separation of Church and State), the wishful (trickle-down economics), and the delusional (I don’t need government, except for roads/medicare/policing/regulation that benefits me/posting me my tax rebates).
I mean no ill will to you. I’d just rather that you called them a bunch of politically naive delusionals with no grasp of reality.
It won’t just be me thanking you. The retards will too.
You can compress that statement very easily, with no loss of information, by removing everything after “There is no way for the US to climb out of debt.” We already have over $50,000 of debt per person including those already retired, newborns, everybody. Over $200,000 for every family of four. We are spending a great deal more than we take in. There is simply no way to tax enough to balance the budget, much less create a surplus large enough to make a dent in that debt.
And none of this takes into account the orders-of-magnitude higher unfunded obligations yet to come. (We haven’t borrowed to pay for it yet, but it’s a bill that’s coming. Much like rent or scheduled child support payments. If you don’t have the income to cover these obligations, it will get converted to debt when the day arrives.) It also doesn’t take into account the possibility that interest rates will go above their current historically low levels. And it is certain they will.
We have promised too much to too many, and it is not possible to keep those promises. We will default.* The U.S.’s debt rating is rightfully “junk”. The only question remaining is how long we can keep the game of musical chairs going, and who will be left holding the bag at the end. AAA, AA+, any credit rating above junk is simply a reflection of the confidence that it won’t be whoever’s holding it right now.
* And for those (like Greenspan) who say, “The U.S. will never default, we can print enough money to pay everyone.” that will only devalue the dollar. You’ll get every dollar you were owed in nominal terms, but if those dollars only buy half as much, it’s a 50% haircut. If you think lenders don’t understand this, and won’t demand higher interest rates in an attempt to be compensated for this loss, you’re in for a rude surprise.
Finally, someone with some sense!
This fiscal irresponsibility by the Republicans is disgusting. It’s truly sad when a political party places more value on making sure their opponent (Obama) doesn’t see a second term than when there are millions of people suffering, going hungry, not able to pay bills, etc.
Talk about irresponsible.
Here’s a solution, anyone working in congress, the house of representatives and any white house staff (including the president) should be legally linked to their job. If they act irresponsibly, that irresponsibility is held to them personally.
For example, since the Republicans were making things difficult and on the cusp of sending the US into default, for every day that republicans delay, they must release 10% of their funding for that month into a public trust fund for those who are unemployed in their home states. This way, politicians are compelled to act on issues that are important to their constituents, and if they fail as a party, they are fiscally punished as a party as well.
Also, one very important change.
Remove *ALL* lobbying in politics. Make lobbying illegal. If anyone is found lobbying the government with money, items, businesses, etc, they go to jail. Simple as that.
This would go a LONG way to reducing the corruption and idiocy in government.
The trick is to make EVERY politician PERSONALLY accountable for any bad decisions they make.
How do we do that on a large scale? I don’t know. Just throwing out ideas.
Ah, yes. It’s all the Republicans’ fault.
Have you noticed the European markets this week? Social democracies, universal health care, subsidized housing, high taxes, mass transit, all the things American Democrats want here, they’ve got it. Is it helping them? No. As a matter of fact, the U.S. is – today, after the downgrade! – having an easier time borrowing than ever, because the European economy is melting down. S&P can claim anything they like, but the markets have a different opinion on where money is best kept safe. The U.S. may be in bad shape, but we don’t have to outrun the bear. We just have to outrun the other campers. And right now, we’re still in the lead.
You get them to tweet their politicians as suggested by the President ;). I thought that was one of the most laughable moves of all. And your only hitting 2/3rds of the blame there, guy. I agree with the lobbying part, though. They are the ones that really stir the pot and make otherwise doable situations fat to the point of spoilage. My only other recommendations would be to rebalance some districts because you hit the responsibility nail on the head. I generally question why anyone would get into politics other than money or power. Anyone that says “for good” is automatically suspicious.
That’s what happens when someone lives beyond their means, government or person.
But you are correct, raising taxes and cutting spending, plus closing ALL corporate tax loopholes would be a good START.
Where you go from there dictates whether the US is even capable of rebounding from a debt this large.
What all countries with a AAA rating have in common? Now all countries with an AAA credit rating have universal health care.
Are all countries with universal health care rated AAA? See how that’s a more interesting question?
Pretty sure the obvious answer is no, since there are so few AAA rated countries. But somewhere in there is a question or line of research on correlations between the two.
Or let’s get it truly even more interesting….
Who is the only industrialized nation that lags behind all others?
The United States is the only industrialized nation that does not guarantee access to health care as a right of citizenship. 28 industrialized nations have single payer universal health care systems, while 1 (Germany) has a multipayer universal health care system.
I’m sorry, I bet you’ve lost interest at this point… carry on…
My wife came across some tweet saying now all AAA rated countries have universal health care. I have not verified it but from the last list i remember it does seem to be right.
Also notice the number of countries with no data, eg no credit. I’ve got a really neat sub-prime credit plan for them in the works… *rubs hands together anticipatingly*
*Slaps handcuffs on you the moment you start rubbing your hands together*
No! Bad dog! Sit, stay.
Weird… it’s almost as if having government provide health care instead of expecting businesses to foot the bill is GOOD for business.
But what am I saying? That’s commie stuff
Actually it’s not commie stuff, but it does assume that S&P has a clue (they don’t) and that correlation equals causation. Other than that, spot on.
Hey Canada? Yeah, it’s Barack. How’s it goin? I’m good. Um…would you do me a solid? I want to get some sweet new F-35s but the bank is being a bitch about lending me the money. Would you..like…cosign for me? I’d reaaaaaly appreciate it.
Sorry Barack, not untill you pay back all of your fiscal obligations to us.
Canada’s credit rating was downgraded in ’93 after almost 9 years of Progressive Conservative rule. It took an election where the PCs were absolutely obliterated from the national political landscape and a Liberal government overwhelmingly voted in for the books to be responsibly balanced and our Prime rating restored. Just saying.
Yes it did.
Republicans/Progressive Conservatives are the downfall of a society. We’re seeing a perfect example of this in the US right now.
I’m not saying some measure of balance shouldn’t be kept, but as a general rule, I’ve noticed that most PC/Republicans aren’t qualified to be governing a country, nor are they intelligent enough to.
Sorry if that seems discriminatory, but just take a good long look at the political landscape of the US over the last.. what… 3 or 4 terms.
Who acted like a bully, and still acts like a bully while in power (The tea party of today, George Bush Jr.)? Republicans.
Who doesn’t care about the economy as long as Obama doesn’t see a second term? Republicans.
Who continually sabotaged the debt ceiling negotiations and almost sent the US into default? Republicans.
Who is going to destroy the US and see it become a third world country? Yup, you guessed it. The Republicans.
Sorry if it seems like I’m being unfair… but.. I’m not. Hindsight is 20/20, you know and I just don’t have any reason to believe that the republicans are going to change for the better anytime soon..
Kinda the same way China sees the US.
Cmon Israel has a lower grade than SYRIA !!!!??? Are you kidding me ?
Israel’s kind of an economic mess right now. Like tent cities and massive demonstrations demanding cheaper cottage cheese. Not that that actually invalidates your point.
Never did trust Belgium.
Belgium has been without a federal government for over a year now. It’s not so much that their finances are unstable, but the entire country. And when the country breaks up, who knows who’s going to repay the debt? Flanders can easily do it. Wallonia might have some trouble.
I’m surprised Turkey’s credit rating is so low. I was under the impression the Turkish economy was booming.
I personally always liked the ‘tax more and spend less’ plan, but alas, that instantly brings out the indignant cries from the left and right. My financial plan of ‘spend only what you make, minus some for a rainy day’ seems to be loathed by all. I have a nasty feeling that the compromise solution won’t be tax more and spend less, but will be tax less and spend more. Such a waste.
You guys need to vote some non-millionaires into Congress. Congressmen and senators profited disproportionally from the Bush tax cuts, so they’re unlikely to revoke them, whereas the vast, vast majority of American voters wouldn’t notice those taxes at all. You need some honest politicians, that aren’t so easily bought by the rich.
I agree, but….
Where would we find such politicians? A corrupt system, like the one in the US, fosters corruption, even in someone whose intent is to help. An honest politician is like a generous taxman, a fantasy.
Politicians don’t need to change, we need to change the system and remove the politicians completely. Or change the kind of person who is accepted to work in this “profession”. (And I use that term VERY loosely.)
You can’t do much about who gets elected or how they act once they’re in office. You can limit the amount of time that they can act for good or for evil.
Yes, but it was bound to happen.
Decadence tends to breed laziness and corruption. That’s what you get when the top 1% of people rule everyone else.
This is the U.S’s own fault. No compassion from me. You made your bed, now sleep in it.
Additionally worrying is that the three main credit agencies have a negative outlook on the US – meaning it’s probably going to get downgraded again. S&P picked out two areas of worry. First, it said the deficit should be cut by $4 trillion over 10 years, while the plan puts this at only $2.1trn. The second is the chaotic budget process.
There’s an interesting article from a non-exec director of Morgan Stanley Asia here (http://english.aljazeera.net/indepth/opinion/2011/07/201172812165308720.html) about Chinese discontent with the US political process.
Standard & Poor’s has zero credibility. I couldn’t care less what they think after they rated all those subprime mortgage bonds AAA.
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