Markets fall on Standard & Poor’s “Politics” Downgrade:
America Won’t Default: Buffett & Others React.
Worldwide major averages fell today in reaction to the U.S. downgrade from Standard and Poor’s that some are calling “absurd” and nested in politics. The Standard Poor’s statement regarding the likelihood of a U.S. default is devoid of dates they believe the U.S. default is imminent but filled with political economy statements. For example, regarding a U.S. default Standard and Poor’s stated:
“The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics,”
Today, Standard and Poor’s downgraded Freddie Mac, Fannie Mae and Federal Home Loan Bank at a questionable time when markets were already on the downside.
Buffet and Others React:
The S&P has also been contradicted by famed investor Warren Buffett who disagrees with the Standard and Poor’s call and other ratings agencies like Moody’s and Fitch haven’t changed their rating on the U.S. Looking at the call from Standard and Poor’s, it’s hard to see the actual business investment decision based on numbers and forecasts.
When the dust settles the ratings agency could have some negative ratings of their own based on the fact they admitted being 2 trillion off in their calculation but downgraded the U.S. anyway -when many believe there is actually a zero chance of default- relative to most other countries.