Comments on: America’s Triple A Rating at Risk http://moslereconomics.com/2009/05/13/americas-triple-a-rating-at-risk/ St Croix, United States Virgin Islands Wed, 23 May 2012 01:34:07 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Jim Baird http://moslereconomics.com/2009/05/13/americas-triple-a-rating-at-risk/comment-page-1/#comment-6181 Jim Baird Mon, 18 May 2009 20:24:27 +0000 http://www.moslereconomics.com/?p=7976#comment-6181 The problem is that the rating agencies give countries' sovereign debt ratings without distinguishing between debt in their own currencies and true external debt. So, you have absurdities like Japan - which continues to be able to "raise" all the yen it wants at 0% interest because of the ZIRP - gets rated lower than Botswana. It doesn't really affect anything, but it is a useful political tool for deficit terrorists. Here's an old paper by Warren on the Japanese downgrade: http://www.epicoalition.org/docs/flawed_logic.htm The problem is that the rating agencies give countries’ sovereign debt ratings without distinguishing between debt in their own currencies and true external debt. So, you have absurdities like Japan – which continues to be able to “raise” all the yen it wants at 0% interest because of the ZIRP – gets rated lower than Botswana. It doesn’t really affect anything, but it is a useful political tool for deficit terrorists.

Here’s an old paper by Warren on the Japanese downgrade:

http://www.epicoalition.org/docs/flawed_logic.htm

]]> By: jcmccutcheon http://moslereconomics.com/2009/05/13/americas-triple-a-rating-at-risk/comment-page-1/#comment-6180 jcmccutcheon Mon, 18 May 2009 19:54:25 +0000 http://www.moslereconomics.com/?p=7976#comment-6180 Yes, but some many countries who have their own currencies make contracts to repay loans in currencies they cannot issue. Yes, but some many countries who have their own currencies make contracts to repay loans in currencies they cannot issue.

]]> By: Curious http://moslereconomics.com/2009/05/13/americas-triple-a-rating-at-risk/comment-page-1/#comment-6162 Curious Sun, 17 May 2009 18:17:33 +0000 http://www.moslereconomics.com/?p=7976#comment-6162 If that is the case, then every country in the world that has its own fiat currency should be rated AAA, shouldn't it? Is it? (Warren you have access to that information on Bloomberg, no?) If that is the case, then every country in the world that has its own fiat currency should be rated AAA, shouldn’t it? Is it? (Warren you have access to that information on Bloomberg, no?)

]]> By: warren mosler http://moslereconomics.com/2009/05/13/americas-triple-a-rating-at-risk/comment-page-1/#comment-6160 warren mosler Sun, 17 May 2009 15:01:52 +0000 http://www.moslereconomics.com/?p=7976#comment-6160 For the purposes of the AAA rating inflation does not constitute default. That's an academic question and not a 'legal' question. For the purposes of the AAA rating inflation does not constitute default.
That’s an academic question and not a ‘legal’ question.

]]> By: Ed Rombach http://moslereconomics.com/2009/05/13/americas-triple-a-rating-at-risk/comment-page-1/#comment-6159 Ed Rombach Sun, 17 May 2009 14:56:02 +0000 http://www.moslereconomics.com/?p=7976#comment-6159 The idea that the government defaults by way of inflation makes intuitive sense. Shortly before he died, Supply-Side icon Jude Wanniski wrote an open editorial memo on his website to Ron Paul, “Ron Paul’s Great Question”. Wanniski commented on the question Ron Paul asked of Alan Greenspan in Congressional testimony before the House Financial Affairs Committee, not long before Greenspan departed from the Fed. Ron Paul’s question, Greenspan’s response and Wanniski’s take on the exchange addresses your question about whether the government defaults by way of inflation. Here is the link: http://www.gold-eagle.com/editorials_05/wanniski072705.html If inflation is analogous to default, it should show up in the relationship between U.S. government CDS spreads and the spread between nominal U.S. treasuries and TIPS. However, the data appears to be inconclusive. From Jan 2 to March 6, the 5yr TIPS spread widened +63bp from negative -25bp to +37bp after hitting a high water market of +93bp on Feb 9. During that time U.S. government 5yr CDS widened from +37bp from 65bp to 102bp. However since then, the 5yr TIPS spread has continued to widen another +59bp to 96bp, while 5yr U.S. government CDS has narrowed -65bp to 37bp as of May 15, after getting as tight as 28bp on May 7. This implies relative value profit opportunities from an apparent ignorance gap that exists between nominal treasuries, TIPS and CDS. The idea that the government defaults by way of inflation makes intuitive sense. Shortly before he died, Supply-Side icon Jude Wanniski wrote an open editorial memo on his website to Ron Paul, “Ron Paul’s Great Question”. Wanniski commented on the question Ron Paul asked of Alan Greenspan in Congressional testimony before the House Financial Affairs Committee, not long before Greenspan departed from the Fed.

Ron Paul’s question, Greenspan’s response and Wanniski’s take on the exchange addresses your question about whether the government defaults by way of inflation. Here is the link:

http://www.gold-eagle.com/editorials_05/wanniski072705.html

If inflation is analogous to default, it should show up in the relationship between U.S. government CDS spreads and the spread between nominal U.S. treasuries and TIPS. However, the data appears to be inconclusive.

From Jan 2 to March 6, the 5yr TIPS spread widened +63bp from negative -25bp to +37bp after hitting a high water market of +93bp on Feb 9. During that time U.S. government 5yr CDS widened from +37bp from 65bp to 102bp. However since then, the 5yr TIPS spread has continued to widen another +59bp to 96bp, while 5yr U.S. government CDS has narrowed -65bp to 37bp as of May 15, after getting as tight as 28bp on May 7.

This implies relative value profit opportunities from an apparent ignorance gap that exists between nominal treasuries, TIPS and CDS.

]]> By: Curious http://moslereconomics.com/2009/05/13/americas-triple-a-rating-at-risk/comment-page-1/#comment-6118 Curious Thu, 14 May 2009 05:21:15 +0000 http://www.moslereconomics.com/?p=7976#comment-6118 Yes, the US government can never default, they can always print as much money as needed. Isn't there a risk though, that they will default (for a lack of better word) through inflation? In all seriousness, Zimbabwe probably didn't default, but would anybody rate them AAA? Yes, the US government can never default, they can always print as much money as needed. Isn’t there a risk though, that they will default (for a lack of better word) through inflation? In all seriousness, Zimbabwe probably didn’t default, but would anybody rate them AAA?

]]> By: Anderson Cooper http://moslereconomics.com/2009/05/13/americas-triple-a-rating-at-risk/comment-page-1/#comment-6117 Anderson Cooper Thu, 14 May 2009 04:31:43 +0000 http://www.moslereconomics.com/?p=7976#comment-6117 LOL! You are a comedian Mr. Mosler! You will make a fine politician. Job Security through obscurity. What was it the bible says, sometimes you have hope and faith and take that leap. Trust in Obama, absolute power will not corrupt him absolutely ;) LOL! You are a comedian Mr. Mosler! You will make a fine politician. Job Security through obscurity. What was it the bible says, sometimes you have hope and faith and take that leap. Trust in Obama, absolute power will not corrupt him absolutely ;)

]]> By: Warren Mosler http://moslereconomics.com/2009/05/13/americas-triple-a-rating-at-risk/comment-page-1/#comment-6114 Warren Mosler Thu, 14 May 2009 01:20:03 +0000 http://www.moslereconomics.com/?p=7976#comment-6114 Obama won't even tell you who he's lending eleventy seven trillion zillion dollars to. i only have to do better than that Obama won’t even tell you who he’s lending eleventy seven trillion zillion dollars to. i only have to do better than that

]]> By: Anderson Cooper http://moslereconomics.com/2009/05/13/americas-triple-a-rating-at-risk/comment-page-1/#comment-6112 Anderson Cooper Wed, 13 May 2009 22:15:48 +0000 http://www.moslereconomics.com/?p=7976#comment-6112 "The panel agreed with us and reportedly has changed their report, including the elimination of the concern over intergenerational transfers." Who were the members of the panel Warren? Who was the majority and minority chairs? You say reportedly changed the report? Who said that? You don't know for sure wether it was changed or not? That seems rather vague for me, for a man vying to be president, you need crystal clear FACTS and vivid transparency to get my vote. “The panel agreed with us and reportedly has changed their report, including the elimination of the concern over intergenerational transfers.”

Who were the members of the panel Warren? Who was the majority and minority chairs? You say reportedly changed the report? Who said that? You don’t know for sure wether it was changed or not? That seems rather vague for me, for a man vying to be president, you need crystal clear FACTS and vivid transparency to get my vote.

]]> By: All you need is lub http://moslereconomics.com/2009/05/13/americas-triple-a-rating-at-risk/comment-page-1/#comment-6111 All you need is lub Wed, 13 May 2009 22:13:02 +0000 http://www.moslereconomics.com/?p=7976#comment-6111 "The ratings agencies, however, don’t understand the monetary system, and it is indeed possible they will downgrade the US much like they have downgraded Japan." Some renaissance man kept telling everyone the world is round, not flat, he died burning at the stake. If everyone else believes one thing, true or not, and your theories are not accepted until a few hundred years after your death, and then have those ideas attributed to someone else, what have you achieved? "I’ve got the recording posted on my website from the Mike Norman show where he agrees government solvency is not a risk." Mike Norman, the guy who laughed at peter schiff in 2007 about the coming housing collapse, like we are supposed to respect anything associated with Mike (rolls eyes) Perhaps Walker is a snake oil salesman like all the rest, or maybe he changed his mind about the solvency issue, I think people should have a chance to change their mind. I am still waiting for Mike or anyone here to admit Mike was wrong to laugh and ridicule Schiff and to apologize. It's ok to change your mind Mike, I forgive your rude crass shallow sillyness, can the rest of you do that for Walker? I have lots of green pieces of paper, right now they can buy a good eliot spitzer hooker for 5K of them, I personally don't want that to increase to 10K or 20K of them and wish for my green pieces of paper to keep thier purchasing power relative to spitzer hookers. “The ratings agencies, however, don’t understand the monetary system, and it is indeed possible they will downgrade the US much like they have downgraded Japan.”

Some renaissance man kept telling everyone the world is round, not flat, he died burning at the stake. If everyone else believes one thing, true or not, and your theories are not accepted until a few hundred years after your death, and then have those ideas attributed to someone else, what have you achieved?

“I’ve got the recording posted on my website from the Mike Norman show where he agrees government solvency is not a risk.”

Mike Norman, the guy who laughed at peter schiff in 2007 about the coming housing collapse, like we are supposed to respect anything associated with Mike (rolls eyes) Perhaps Walker is a snake oil salesman like all the rest, or maybe he changed his mind about the solvency issue, I think people should have a chance to change their mind. I am still waiting for Mike or anyone here to admit Mike was wrong to laugh and ridicule Schiff and to apologize. It’s ok to change your mind Mike, I forgive your rude crass shallow sillyness, can the rest of you do that for Walker?

I have lots of green pieces of paper, right now they can buy a good eliot spitzer hooker for 5K of them, I personally don’t want that to increase to 10K or 20K of them and wish for my green pieces of paper to keep thier purchasing power relative to spitzer hookers.

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