“Irony Is That the Same People Who Rated a Flaming Bag of Crap AAA Have Downgraded Us”

In case you’ve been living under a rock:  Standard and Poors downgraded the credit rating for the United States of America last night, from AAA to AA+.    My friend YangaBanga noted:

“Irony is that the same people who rated a flaming bag of crap AAA have downgraded us.”

You can read S&P’s report here, but there’s really only one important line in my opinion.  Read this one carefully:

“The political brinksmanship of recent months highlights what we see as America’s governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed. The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy.”

The rest of the report is noise about debt/gdp ratios, deficit reductions, fiscal consolidation, etc.  Felix Salmon got it right when he wrote:

“talk of debt-to-GDP ratios and the like is a distraction. You can gussy up your downgrade rationale with as many numbers as you like, but at heart it’s a political decision, not an econometric one.”

And that is why I pulled the prior paragraph about our disfunctional partisan government.  S&P has downgraded the United States Congress, in my opinion.

Felix’s next sentence summed it up, emphasis mine:

“Secondly, the US does not deserve a triple-A rating, and the reason has nothing whatsoever to do with its debt ratios. America’s ability to pay is neither here nor there: the problem is its willingness to pay. And there’s a serious constituency of powerful people in Congress who are perfectly willing and even eager to drive the US into default.”

I’ll repeat what I wrote about the subject last week:

“The US Dollar is, and continues to be the reserve currency of the world – despite what some may want to tell you to the contrary.   In my opinion, fears of the dollar losing its reserve status have the HIGHEST chance of being realized if we default on our debt.”

related:  Barry Ritholtz: “10 Questions About S&P’s Downgrade”

-KD

 

 

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