Life After AAA: Analysts Thoughts On A What If Scenario

APRIL 19, 2011, 3:54 P.M. ET Life After AAA: Analysts Thoughts On A What If Scenario

online.wsj.com

How would corporate bonds, emerging market debt and other securities be priced if there were no longer "risk-free" rate to benchmark against? Would the dollar lose its status as the world's reserve currency?

Opinions were mixed, but for the most part our correspondents' answers painted a picture of a flexible Wall Street finding a way to cope. A post-AAA world would be different, but it would carry on.

(visit the link for the full news article)

This story in the Wall Street Journal paints a not-so-bleak perspective of what might happen if/when the US looses it's AAA rating...

For example, here is one comment....

--Gary Jenkins, head of fixed income research at Evolution Securities in London: "A one-notch downgrade by one agency would generate huge headlines, the world would end for about half an hour, then we'd all go back to work. The U.S. is regarded as the safe haven, but the market gets used to these moves very quickly and takes them in its stride."

So is it really not all that big of a deal? Much Ado about nothing? I think that if that were the case the rating then would be worthless as a measurement took wouldn't it?

Whats your thoughts?

online.wsj.com
(visit the link for the full news article)

The U.S. is regarded as the safe haven, but the market gets used to these moves very quickly and takes them in its stride."

Know why that is? Because stupid economic teachers in all universities around the world are teaching this nonsense.

I know, I had a few economic teachers at university and they all teach that. One of my friend has a PHD in economics and he tells me the same thing. He never heard of Austrian economics, nor did my teachers. They still believe in Bernanke and the almighty dollar.

The universities are run by bought and paid for/brainless economists... Yeah they know what's in their books, but they can't see past that. They don't think for themselves.

Also they told me for years that gold was real bad... and that no economic crisis was coming... and that Bernanke was not printing money and that there's no fraud on Wall Street nor insider trading.

Freaking economic teachers... I wish I could talk to them now and tell them TOLD YA SO!!!!!!!

reply to post by HunkaHunka


I'm confused . . .
Call me misinformed, but what is the AAA?

reply to post by seraphnb


It's our credit rating. AAA is really good, but they are threatening to drop down to AA because we don't have a plan to get our spending under control. If they downgrade our rating we will pay a higher % of interest on our outstanding debts.

BTW HunkaHunka, you have to have a subscription to the wsj to read the full article.

reply to post by HunkaHunka


The whole system is crazy.

The system doesn't like it because you are not coming down hard enough on your citizens (as if the number of foreclosures and homelessness hasn't increased), so they threaten to increase the interest you have to pay on your debt? As if all of a sudden you are going to find the additional interest from the ether.

This is the way all financial institutions work. Offer you an umbrella when the sun is shining and take it straight back when it starts raining!!

reply to post by tooo many pills


Thanks! Now, the entire article makes a lot more sense.