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Kasz216 on 02 August 2011
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Akvod said:
Kasz216 said:
 


Explain how the damage was done.

Like, explain why this is the fault of the Debt ceiling almost not getting raised. 

Versus the much more conservative outlooks of rating agencies after the failings of euro goves deficit spending, in most recent cases, Italy and Spain, and the general realization that the US is headed that way pretty hard with spending being waaaay over earnings and earning unlikely to increase any time due to the fact that the stimulus failed and GDP growth is horribly stagnant.

This was coming anyway, the debt ceiling just gave congress a "need to do something" attitude.

Without it.... the "damage" would of been done anyway... just probably a lot less uncerimoniously.

Why else do you think the US needs 4 trillion in cuts before being downgraded.  (A number that's actually going to seem too small once the CBO recalculates growth outlook.)


The damage was done, because we just had a debate, that ended literally hours before we ran out of money, on whether or not we were going to pay the obligations that we already owe.

There's a reason why Obama and others didn't want to have a tiny debt ceiling increase, so that the debate could go on longer. It's because they don't want investors to think that such a debate would happen again, that another close call situation would occur again. The so called "cloud of uncertainity".

Investors don't like to see a government that's unable to run the most  basic operations of a country. They don't like to see highly partisan governments. They want to see a stable government that can get its shit together.

"Why else do you think the US needs 4 trillion in cuts before being downgraded. " That's an arbitrary number that one of the ratings agency determined.

 

Anyway, stock markets went down when they saw just the awful growth and production the US is having. And I'm sure small business owners are just going to start spending again, once they see that big bad government is cutting it's spending. Surely not because they simply don't have any customers and there's no reason to increase capacity, when your production capacity exceeds demand.

Surely the government laying off government workers would purge and purify the markets, so that deserving people can get employeed. Surely consumers would start chearing and start spending again.

 

The economy is now seen as something magical now.

So in otherwords.... you can't explain it.

You can't explain why the credit rating agencies said cuts HAVE to be made regardless of the state of the debt ceiling.

It's actually pretty simple.

There were two problems behind it.

1) The Debt Ceiling.  Which was only a problem if it didn't pass.  Which it did... and it always was.  If you watched the Stock Markets, Wal-Street actually wasn't really reacting negativly to the Debt Ceiling debate at all.  Even when all the doom and gloom came out, the Market was up, when it went down, it was largely due to some company having negative losses and to Spain, Italy and Greece.

2) Goverment intrest.  I mean, look at why the Debt ceiling had to be paid off... we're paying off our credit cards.... by getting more credit cards.  I mean, hello, the low growth shows even more why cuts are needed, because the economy isn't growing, which means the deficit spending is actually higher then what we think it is.


The stimulus is a net negative and it's why such drastic cuts are needed now.