Monday, August 15, 2011

How Australia straightened up their S&P rating......listen up

Australia lost and then finally recovered its AAA rating ...
From THIS site, we get the following article: 

EVEN though Standard and Poor's downgraded the US credit rating, Americans may be cheered by the examples of Australia and Canada, which both managed to restore their lost triple-A scores.
S&P revised the nation's rating downwards to a AA+ with a negative outlook, despite a push back from the White House which said the agency's analysis of the US economy was deeply flawed.

While some nations have managed to climb back again to the top notch rating, others have found it extremely difficult to recover the coveted crown.

S&P removed Australia's AAA in 1986 and only gave it back 17 years later.

During that time Canberra adhered to strict budgetary discipline and even capped its debt in 1997.

It also benefited from rapid growth and a broad transformation of its economy, modernising its financial system and deregulating uncompetitive sectors. Meanwhile, demand from a resurgent China drove a boom in the Australian mining industry.

S&P took away Canada's AAA rating on debt denominated in foreign currencies in 1992.

But Ottawa recovered the grade in 2002 after reducing government spending as a fraction of GDP by more than 8 per cent, through a series of stringent spending cuts. (Canada's sovereign debt as denominated in Canadian dollars was never downgraded.)

S&P cut Japan's AAA rating in 2001, and since then the debt-ridden country has descended to AA-.
But Japan's borrowing costs did not rise immediately after the first cut -- suggesting a US downgrade might not be catastrophic.

Tokyo's lenders -- who are mainly domestic -- continue to buy its debt today even though Japan's debt-to-GDP ratio is a colossal 225.8 per cent, the largest of any country.

More recently, three European countries were in the AAA club before being booted out: Ireland from 2001 to 2009, Iceland from 2005 to 2008 and Spain from 2003 to 2010.

All three benefited from speculative real estate bubbles that swelled tax revenues, until the bubbles popped. Ireland, rated BBB+ by S&P, has not been able to tap credit markets since 2010. Iceland, at BBB-, successfully issued bonds only in June after three years of no access to commercial credit markets.

Madrid retains a respectable AA rating, but jitters in the bond markets over its debt load has sent the risk premium on Spanish bonds -- the extra return demanded by investors compared to safe-bet German debt -- to a euro-era record of 407 basis points.  (end of article)

Z............pretty interesting stuff;  and look what Australia and Canada had to do to get back into shape.    Will we?  Of course not.   We've got people who won't listen to anybody but Geithner and Krugman!!  What a joke.



Always On Watch said...

We've got people who won't listen to anybody but Geithner and Krugman!

FYI....Krugman's book on macro-economics is often the textbook of choice at community colleges. Those students are being imprinted with Krugman's views on economics.

Silverfiddle said...

Thank you for this timely post.

We are out of good options. Whatever we do it will be painful.

On a related note, go see Heritage Foundation's Index of Economic Freedom. Australia is #3, Canada is #6 and Obama's Crony Crapitalist America has fallen to #9.

Wake up America! Look at what works and copy it!

(Sad to note that back in the good old days other countries looked to us and copied what we were doing)

Always On Watch said...

BTW, I may get to teach an econ course this coming school term. Leftists will have a meltdown: one of the "texts" is Milton Friedman's.

Lisa said...
This comment has been removed by the author.
Lisa said...

It's a shame that our country chooses to operate on politics and not sound fiscal policy.
Even Puerto Rico made some tough choices by cutting back on government workers while ours go on strike to demand more in order to keep the money flowing back to the democrats, money they get via the tax payer that is being spent by the millions not for the worker but for the power.
It would OK if they used the money from something they actually produced,not money that is used to pay Peter to Pay Paul to Pay Peter again. And of course we all know Margaret Thatcher's famous line which is being proven true in England.
This is why we need a pro business president and not a pro government one.

Ducky's here said...

Well, not to worry, folks.

Patty Murray and John Kerry aren't going to allow any serious defense cuts. The fix is in. So that portion of the economy will continue to grow.

The cuts will come from Medicaid as we continue to build one of our foremost growth industries, the underclass.

Ducky's here said...

Silverfiddle you mention two nations that have benefited from the commodities boom significantly.

That has a lot more to do with their state than the phony "economic freedom" index.

We have some boom industries also, military ordnance and prisons. Bon temps roulez.

Bloviating Zeppelin said...

The question as any sane person realizes isn't CAN we do this, and recover fully. . .

The question is do we -- the federal government -- have the WILL to do this, and recover fully?

This was the MOST avoidable crisis in our history.


Bloviating Zeppelin said...

Say Ducky, since you're not writing from prison, how is it that you've somehow managed to keep out?

It really hasn't been that terribly difficult, has it?

That's called a clue.


Z said...

AOW, will respond to the comments pertinent to this post later; I came over (and will go to your blog, too) to tell you what I just heard on TODAY this morning...that the Norwegian killed all those people 'because of his feelings toward Muslims and RELIGIOUS REASONS'....all of America getting their inference, of course. Apparently, their research is confounding them and they refuse to admit his own words were that he's not a religious man, OR that any true Christian wouldn't kill those people if his life depended on it. unreal.b Maybe SNOPES is doing their research?

Ducky's here said...

Much ado about nothing.

Treasury sales are strong and only one of the three ratings agencies issued the downgrade.

Political kabuki.

Z said...

it helps to actually read the posts, Ducky.
You need to try it.

Elmers Brother said...

But see in duhkkkys world the only bad consumerism/spending is done by the average Joe. Let the gubmint leverage everything but the kitchen sink, spend like theirs no tomorrow and we can't have enough of it.

Elmers Brother said...

I'm homophonic - there's not theirs

Ducky's here said...

FYI....Krugman's book on macro-economics is often the textbook of choice at community colleges


They stopped using Samuelson?

Z said...

Ducky, the 'choice' of professors; I love an unbiased classroom, don't you? my GOD.


Impertinent said...

"Krugman's book on macro-economics is often the textbook of choice at community colleges"

So's the one on fisting... a real popular pick mandated by comrade O's "queen" czar.

I hear Krugman co wrote it too....seems that's where his economic theories lie.

Thersites said...

Treasury sales are strong

That's only because the FED is also doing most of the buying...

In other words, Uncle Sam has his heavy thumb on the merket scales:

U.S. Treasury bond yields tumbled last week despite Standard & Poor's downgrade of the government's credit rating to AA+ from AAA. Again, welcome to Wonderland: The government supposedly is a worse credit risk, yet investors elbow each other aside to buy more U.S. bonds. Prices rose only slightly Monday as the stock market stabilized.

The new rush to Treasuries reflects heightened fears about the global economy and also was abetted by the Fed's pledge to hold short-term rates down potentially through mid-2013. Some yield is better than no yield, or so bond buyers are figuring.

But what are interest rates really supposed to be these days? The market has been badly distorted by the Fed's unprecedented intervention: While the central bank is keeping short rates near zero it also continues to buy a limited amount of Treasury bonds with the proceeds of its $2.6 trillion securities portfolio.

And if the economy stumbles further, some analysts believe it's only a matter of time before the Fed announces another massive bond-buying campaign, perhaps far larger than the $600 billion program it completed in June.

Trestin said...

Good information. I was not aware Japan had been downgraded that much.

MK said...

Everywhere you turn they get their house in order by cutting drunken spending. Only in obama's world does spending like a drunken moron equate to fiscal responsibility.

Either that or it's all the Tea Party's fault, the same folks he dismissed as just a racist, irrelevant rabble. idiot.