Well, it looks as if Standard & Poor’s has downgraded the US debt, as they promised they might. Although this is only one major credit rating agency, it is a significant event, as it is the first time that a credit rating agency has lowered US debt in the history of our country (credit ratings for US Treasuries have been graded since 1917). Indeed such a major event as this also causes conspiracy theorists to come out of the woodwork, and put in their two cents.
It is also cause many of the doom and gloom traders who like to short certain stocks, funds, currency, and bonds to call for a massive drop in the stock market, and a massive selloff in the markets globally. There is a good chance this will be a non-event, or a short-term issue since it is only one credit rating agency, and that most people already know that the United States federal government is living beyond its means, and borrowing nearly 40% of every dollar that it spends. Remember, there are serious issues happening in Europe right now which could cause larger issues.
Now then, let’s talk about the downgrade rational from a philosophical perspective. Obviously, if a business wasn’t making money, and borrowing 40% of what it spends, or if a consumer was doing the same, chances are there credit rating would be very stellar either. Below are some of the conspiracy theories that I’ve heard, and I would like to talk to you about these for a few minutes;
1. The Downgrade Was Made to Protect EU Economic Market Collapse and Fleeing Capital to Safety (US Treasuries).
2. Standard and Poor’s is Working Very Hard to Break Into China, and Without a US Debt Downgrade They Wouldn’t Get the Juice
3. Standard and Poor’s is Angry at the US Department of Justice Investigating Them and Had Put Off the Downgrade Until it Knew the Investigations Were Winding Down
4. The S & P Downgrade Was Political in Nature
5. S&P realized that other credit rating agencies were going to eventually downgrade US Treasuries and it wanted to be first, and preempt.
Everyone knows that the US economy is connected to the global economy, so it is not too surprising that someone would make the assessment that S&P downgraded the US credit rating to make the EU look good as the European Central Bank tries to hold together the European Union, and the euro, by selling treasuries of its own in the future, or buying up the bonds of challenged nations (PIIGS) Portugal, Spain, Italy, Ireland, Greece. Of course, if we Downgrade the US debt, we have to downgrade the new European Central Bank’s debt as well, along with half of the industrialized nations of the world.
It is known that S&P wants to do more business in China, and also that Chinese stocks are not very trusted, and they need to get some credibility. S&P obviously wants a chance at some of that business in China, but to get in and get access to all those publicly traded companies on the Shanghai exchange (what’s left of it), it needs to go along with China politically, at least in the media. Remember, China is also selling municipal bonds and needs to make the US look less attractive, this is why Dagong, a Chinese rating agency lowered US Treasuries just prior to S&P.
One individual I talked to said that S&P was angry that the US Justice Department was investigating them for their role in the global economic real estate debacle that crashed the global economy. After all they were rating all of those CDOs and mortgage bundles Triple-A, which allowed investment banks, pension funds, central banks, and others to continue trading them at a rapid rate, that is until the music stopped and there weren’t any chairs to sit back in.
The Obama Administration claims that the S&P downgrade was political in nature meant to harm the Democratic Party, and the left-leaning socialist Legislating Congress. It’s hard to say if any of these rumors or conspiracy theories are true, but all of them are quite interesting, and therefore I thought I would mention it, and bring them to your attention. Indeed I hope you will please consider all this and think on it.