Ah. The oil price piece was very education, Bob.
I remember the credit rating bureau's getting a lot of flak in the EU because they were all based in the US, and appeared to be biased towards it. Could there be any truth in that? What are all those ratings based on anyway?
There are European credit bureaus. The reason they're biased towards the USA is that, good or bad, right or wrong, weak or strong, the USA has had the largest economy in the world for decades now. The bias was more in setting the USA as AAA status--which wasn't really a problem prior. The problem is now getting ridiculous. Under Bush, it wasn't a problem because the government, while it had significant debt, it wasn't overburdening. Under Obama now, with a debt equaling about 100% of the GDP, it's overwhelming. If you read the actual S&P report, it basically says three things.
1) Raise revenue higher or cut spending. This recent debt plan is bull****. Don't just cap spending--actually cut it and start paying down this debt.
2) Both branches of the legislature and the administration need to decide on SOMETHING to actually do.
3) I don't care whose plan does it, but get it done!!
Uncertainty kills spending. The S&P analysis of the situation is that of a third party observer.
The credit bureaus don't use singular criteria to rate debt. Here's some considerations...
-Ability to pay debt
-Short-term (<1 year), medium-term (1-5 years), and long-term plans (5-20 years) plans on operations
-Industry trends. How does XYZ look to fare in >5 years? Will their primary product be obsolete or considered a luxury?
-Leadership strength and ability
Anyone who immediately sells their government bonds is an idiot at this junction.
One other thing to note: an important issue when considering foreign investment is the strength of the currency it's issued in. That's one reason that Moody's/S&P/Fitch are somewhat "biased" towards the USA--we have a single currency that has been the benchmark that all other currencies are weighted upon.
