What does S&P downgrade mean for average joe?

I think we are in agreement. I don't think Asia owns the west. it's the economic equivalent of nuclear deterrent between the U.S. and China imo. china bought at least trillion of Treasuries in my opinion over paid for them simply to keep our dollar strong relative their currency, in order to make their exports attractive to the American Consumer in terms of price. I still think they still depend on the American Consumer to a fair degree. I believe it's in their interest to keep the dollar strong. if we were to become more protectionist with tariffs, and it was no longer in their interest to keep the dollar strong, they may start selling off treasuries driving the price down. my hope is that doesn't happen and the equilibrium between Asia and other major holders of treasuries remains.

 

My guess is the politicians will let inflation take off and that's their way out. It won't bother the rich 1 jot, but Joe Average will find he has to cut down on expenses, fuel, alchohol, and if that isn't enough then food etc.

The politicians fill his near imbecilic mind with the usual paliatives of nationalism ( blaming foreigners ) and the American dream. A bit of rioting by students and it's all forgotten that Bush/Obama raised the debt 10 trillion on useless wars/programs etc.

I see the Bin Laden family got the contract to build the tallest building in the world - probably call it the Osama building ?

 

In normal times, a significant percentage of the population of D.C. is highly paid lobbyists representing organizations with financial interests in pending legislation.

But right now? D.C. is going to be absolutely swarming with these rodents, and their impact is going to be substantial.

But what representation does the average Joe have in D.C.?

How about nada. Zip. Zilch. Zero. Because, unfortunately the fathers of our nation didn't anticipate that financial interests could so overwhelm our representatives that our voice has been lost and ignored now for decades.

But make no mistake. Congress and next year's candidates will thrash around and make all kinds of noises about supporting job growth and the average Joe, etc. etc. etc. etc.

However, what will in fact happen is that programs most supportive of the consumer (average Joe) will be slashed and burned, while those being represented by paid lobbyists will be most spared the knife, because it is in the personal/financial interests of our representatives to do so.

And that's sad. Because getting the consumer back in gear is the one thing we most need for a vibrant economy that can go a long way in curing many of our ills.

So, as a brief summary to your question: You are screwed.

 

What he said.

 

Average Joe has been at this for awhile and I think it's July. Listen to the end and you'll understand.
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A nation’s credit rating is analogous to your credit score. Pay your bills on time, never carry a balance, and your score will be near the theoretical maximum of 850. Act like the representatives and functionaries of the United States government do, and your credit rating will be closer to the theoretical minimum of 300.

The higher your score, the more credit you’re entitled to, and at lower rates. Your diligence on the front end can result in lower mortgage payments when you apply for a loan. Same goes for car financing, etc. It’s hard to find a definitive source for this quote, but the classic line is “Credit is most available to the people who need it least.”

National credit ratings are on a different, more coarsely calibrated, non-numerical scale. The same principle is supposed to apply: the better the rating, the lower the interest rates the country can borrow at; and indirectly, the more likely it is that businesses will invest in said country. Standard & Poor’s, the biggest credit rating agency, uses the following rating scheme: AAA/AA/A/BBB/BB/B/CC. Below AAA, each rating also includes either a plus sign, or a minus sign, or nothing. Beyond that, each rating includes a terse descriptor: “positive”, “stable”, the ominous-sounding “watch negative” or “negative”. Confusing things even more, the “positive” and “negative” descriptors have nothing to do with the + or – signs found in some ratings. S&P doesn’t rate every country in the world, because places like Tuvalu and the Vatican City don’t attract enough foreign investment to warrant anyone crunching the numbers (nor do those countries even have their own currencies.)

Therefore, it would seem, the United States’ transition from the world’s most dynamic economy to a backwater incapable of paying its bills and digging ever further into debt is a foregone conclusion at this point. But it isn’t, and this is why:

Volume.

Let’s say you make $40,000 a year and indeed use credit as wisely and sparingly as possible. And say you somehow crack the Fair, Isaac & Co. secret formula to the point where your credit score sits at a perfect 850. You apply to your bank for a loan, primarily just to see if you can do it but also because you want to see how low an interest rate you can qualify for.

The moment after you walk in, Sergey Brin and his 849 credit score apply for a loan.

Who do you think’s going to get a loan with more favorable terms? Mr. Brin might not be quite as on top of his obligations as you are, but he’s not far behind. And he’s got far more money than you do, and far more potential for making yet more. Don’t take it personally.

On Monday the House of Representatives voted to raise the debt ceiling, leaving the Senate to rubber-stamp a similar bill Tuesday and drawing more attention to a particular vote than anything since the nationalization of health care. The nation will reach its credit limit in a few months, Congress will request another increase, and so on indefinitely. Why? Because they can. The Greeks didn’t have this luxury of preeminence, at least not in the last 25 centuries or so.

For the last few weeks we’ve been subjected to a panicked call from journalists who don’t know any better and politicians who never let a good crisis go to waste, trying to make you believe that the world economy is on a precipice. It isn’t. Economies don’t collapse overnight, and if they did it wouldn’t be because of legislative stalemate. America's rating is still going to be relatively strong. Far stronger than China’s, for instance. And we’ll still attract investment from abroad, simply from sheer size. No other country can boast 300 million first-world consumers with a relentless penchant for buying things. That’s a greater determinant of economic robustness than anything else.

That’s not to say that our economy isn’t in the toilet. Nor that our elected representatives don’t need to exercise some serious restraint. Raising the debt ceiling (to more than twice what it was during George W. Bush’s first term) only invites more opportunity to finance an already unsustainable level of government spending. But let’s call Monday’s vote to raise the debt ceiling what it was: it wasn’t a last-second attempt to right the American economy before it collapsed. It was an indirect means of letting our nation’s record debt break even more records. Greater interest payments and an economy built more on borrowing than on wealth creation? Yes, but that’s your grandkids’ problem.

 

I would think, if I were a bond buyer, that the credit rating of a sovereign whose currency is both fiat and the world's reserve currency isn't very important. I would know it is impossible for the U.S. to go bankrupt, and the interest will always be paid. My only concern would be future inflation in the U.S. dollar in relation to my time horizon, and what are the prospects for an interest rate rise. Therefore if I was a bond investor as opposed to a bond speculator, a central bank, or someone just parking money temporarily, I wouldn't be a buyer of U.S. bonds at all.

The average Joe will have no clue about any of this, and his opinion will be formed by CNN, Fox News, MSNBC, etc. When he begins to notice the effect of inflation or higher interest rates on his own life, he'll have not a clue what's causing these things. The only exception would be the average Joe who listens to public radio, and there are no average Joes listening to public radio. If they did, they wouldn't be average.

 

Average Joe is still fairly honest fortunately otherwise he might be tempted to
1. obtain a false id of a real person
2 crank up his credit rating as much as possible
3. planned a bolt hole far enough away
4. obtain as much credit as possible in as short a timescale as possible
5. turn as much of it into cash, set of wheels etc
6. disappear

A bit like some countries really - except for the disappearing bit. They just give the Hawaiian love signal of waving 1 digit in the air

Thanks Mr, George Craphead Bush etc for trashing the economies of the world - only an arsehole like you could have done it

Elected by idiots

 

Humpy, your wisdom sometimes astounds me. (I'm not joking)

 

Well said, JRL.