http://www.foxbusiness.com/markets/2012/01/13/sp-cuts-ratings-on-france-italy-other-european-countries/
Standard and Poor's downgraded the debt of nine Eurozone countries, including France and Italy. U.S. markets fell on Friday as investors learned of the downgrade. Some people think that it is not that big of a deal; however, some say it is in fact a big deal because it has a clear (negative) effect on the market and investor confidence. Confidence in the market and in the world economies is one of the main problems right now. In 2012, there truly is a global economy and what happens in the Eurozone does effect the United States. However, the U.S. was downgraded last year from its pristine AAA rating to AA+ and people continued to buy U.S. bonds. Do S&P's ratings really matter?
I think it is interesting that United States was downgraded to a AA+ status because it was something the Obama administration promised would never happen. I think this could play an interesting role in the coming elections.
ReplyDelete"Credit ratings are forward-looking opinions about credit risk. Standard & Poor’s credit ratings express the agency’s opinion about the ability and willingness of an issuer, such as a corporation or state or city government, to meet its financial obligations in full and on time." quoted from Standard & Poor's definition. I think in the case of the Eurozone, which encompasses so many governments and itself is such a large entity, the S&P ratings do not truly apply. Similarly, the United State's recent downgrade has not caused any significant negative changes in the economy.
ReplyDeleteI agree with Jon, I think that consumer confidence is often overlooked and plays a vital role in both individual economies as well as the world economy,
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ReplyDeleteI think that the S&P ratings are overrated. I agree with Colleen that they don't seem to impact consumers all that much.
ReplyDeleteThe S&P ratings do not matter as much as people make them seem to matter. The ratings are much more like an estimate or just a guideline that does not ensure anything. People still invest in the US because they have confidence in the US economy improving especially with a big election coming up. Since the markets are random, there is no telling which way their investments will go.
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