Will the S&P downgrade kill the USA recovery?
The official USA government response to the S&P credit downgrade is that the rating agency made a $2 trillion mistake. And MSNBC pundit Rachel Madow made the observation on Meet the Press Sunday morning that this development is from an agency noted for granting AAA ratings to junk mortgage investments during the financial meltdown of a couple years ago.
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S&P’s Beers Discusses U.S. Credit Rating Downgrade
See this Amp at http://bit.ly/p1U5QhAug. 5 (Bloomberg) — David Beers, the London-based managing director of sovereign credit ratings at Standard & Poor’s, talks with Bloomberg’s Tom Keene about S&P’s downgrade of the U.S. credit rating. The U.S. had its AAA credit rating downgraded for the first time by S&P, which slammed the nation’s political process and said lawmakers failed to cut spending enough to reduce record deficits. (Source: Bloomberg)
Globe and Mail » David Beers » A metered Internet is a regulatory failure:
“Forget that caricature of the slobbering porn addict next door. Canadians accessed a treasure trove of National Film Board works by the millions of downloads last year. Universities and libraries across the country are working to move priceless archives onto the Internet, where, the idea was, they’d be available to all. Not if it’s too expensive to download them.
Consider the predicament of a small, independent website like mine, The Tyee. Already scraping by on limited resources, but recognizing our audience’s desire for more audio and video, we are working with a network of multimedia producers who really know how to stretch a dollar. But they tell us that UBB threatens to make it too expensive for them to craft their products, considering what they need to download while doing their work, the amounts we can pay and the niche audiences likely to listen and watch.”
Imagine an internet without YouTube or Vimeo, Soundcloud or MySpace, Facebook or Twitter or Flickr or a million pictures of that next baby. Now go sign the OpenMedia petition.
Q: World's Most Powerful Man? A: David Beers from S&P
It turns out the world’s most powerful man is not a world leader, not an elected official and not a billionaire businessman. If you want to find out who can crash international markets and provoke the loss of trillions of dollars by erasing one letter (A), look no further than David Beers, Global Head of Sovereign Ratings at S&P. The aftermath of S&P’s downgrade to the U.S. credit rating was scary. On Monday, the S&P 500 and Dow Jones Industrial Average declined 6.7% and 5.6%, respectively. All stocks in the S&P 500 retreated for the first time since at least 1996 – and the index’s 10 main groups fell more than 5.3%. So who is this David Beers guy? While most have never heard his name before, he is well known by virtually every finance minister in the world. He is a Wall Street veteran and graduated from the London School of Economics. Beyond that, David Beers background and biography is a mystery to most.
But what’s more of a mystery to most people is the power and relevance of the S&P, or more broadly, the collective group of rating agencies. It’s difficult to fathom how these companies have the authority to shake the global economy like this. Their role is very similar to a credit bureau that hands out scores to households and individuals seeking loans. Their reputation for assessing risk has been shaky on more than one occasion. Could this be a new blackeye for S&P? To be certain, it’s going to be tough for Beers & Co. to adequately justify their recent downgrade of the U.S. Much of the rating report submitted by S&P focused on the political dysfunction of the U.S. government as opposed to its true ability to repay its debt. From S&P’s perspective, the question really isn’t whether the U.S. can repay its debts, it’s whether the U.S. is willing to repay. The political logjam from the recent debt crisis highlighted the fact that the U.S. certainly has the ability to make payments but there are many politicians who are unwilling to write the check. And this is what the S&P is most troubled by. While Warren Buffett thinks the U.S. deserves a “quadruple A” rating, the S&P is only halfway there, and that is making all the difference in the markets today.
