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Prior to when I tuned in, Nouriel Roubini was interviewed by Bloomberg on the downgrade in this piece you can stream from This is a decent overview if you want to watch instead of read my haphazard stenography of Bloomberg's coverage:

Later, Roubini and many other economists chimed in further, which I "liveblogged"...


Nouriel Roubini feels S&P jumped the gun and didn't take into account the fact that the debt ceiling did get raised and we're still looking at further cuts in November. Barry Ritholtz feels S&P acted unprofessionally, were not acting as analysts or credit rating agencies in this, and this is political opportunism. He says if you look at the ordering of the ratings they make NO sense -- these other countries should not be above the US. Roubini notes that potential growth in US is higher than Europe and Japan, and wonders if other nations can credibly maintain their S&P ratings.

Vincent Truglia (former Moody's Sovereign Debt Ratings Head) just on Bloomberg noting that (a) it likely won't matter too much, (b) there's no reason for the USA to be worried about debt or deficit in the near-time, and (c) this may actually free up the United States to do things it had previously been unable/afraid to do regarding stimulus measures.

We'll see.

Many confused about the statutory effect (how many inter-institutional financial rules are written assuming US Gov't at AAA?).

Ritholtz notes the absolute absurdity of downgrading the Federal Reserve, which can print its own money. Roubini notes that "value" of the Fed might be lower than before because it holds downgraded assets, but agrees that downgrading the Fed makes no sense. The two of them going back and forth about how silly this is gets entertaining at times because they seem about to laugh at how ridiculous the downgrade is. For some reason Bloomberg has an old owlish looking man (Keene) asking them questions from the studio about whether the US is a banana republic now. Roubini and Ritholtz answer, "no".

On his blog, Ritholtz writes: "[S&P is] utterly corrupt, and should have received the corporate death penalty".

Dan Alpert: "Nothing changes on Monday", "meaningless gesture" by S&P. "This is priced into the market" and "at the end of the day we saw such a demand for Treasuries this week that people believe will be repaid" and so it's ridiculous to think a downgrade would change that.

Tom Keene asks if this is the "gift that keeps on giving for the White House" (because of the text of S&P's announcement letter regarding revenues and acrimony). Economists doing a good job of staying out of the political game.

Disagreement between John Herrmann and Alpert about whether downgrade was priced in to the markets or not. But no one is predicting a crash (though Roubini notes that the economy itself is not good, so the stock market may fall for other reasons).

Roubini says US downgrade increases global uncertainty amidst instability in Eurozone, UK, Japan. Roubini says Treasury yields will go down, not up. On Monday stock market might go down because of uncertainty, but yields might paradoxically go down (good for the US).

Federal Reserve saying risk weights for agency debt unchanged.

Haha, a definite bright spot tonight as I'm reminded again how much I like watching interviews with Nouriel Roubini. Always very clear in his points, free of obfuscatory jargon, and generally right.

This is worth noting: Bloomberg is live on-scene with a (literal) boatload of economists because they're all at the annual Kotok fishing trip retreat in Maine. So they keep dragging sleepy-looking economists out onto this dock to interview them in their rumpled, casual fishing clothes. Roubini hasn't moved (other economists have come and gone) and just waits silently on the dock for the next question. A hilarious, near-parodical scene.

According to every economist on Bloomberg, people will now buy MORE treasuries because this will make the international environment more unstable and the least-risky investment is still US Treasuries. If that comes to pass, S&P's reputation is blown.

The economists are, to a man, either incredulous at S&P's downgrade (why not France or any other AAA nation?) or on the verge of laughter about it, since it's so ridiculous. If Obama and Geithner can go on the offensive and not deliver some mealy-mouthed defensive apologia I think S&P will be very much on their heels next week. I think a mealy-mouthed defensive apologia is exactly what we'll get from Obama or Geithner. Instead of fighting they'll wave away conflict and say we need more vacuous happy-talk in DC. We'll see.

Roubini agrees that if S&P wants to be consistent there should be a domino effect of downgrades.

All economists questioning the validity of S&P more than reliability of US debt repayment.

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