Sunday, August 7, 2011

Sunday Morning Papers: S&P

Today's papers are filled with articles on S&P downgrading America's debt from AAA to AA+. This goes along with my Facebook feed having a number of anti-government/politicians/Obama postings about the S&P, many of them by people who have 1) no idea what S&P stands for, and 2) had not heard "S&P" before Friday.

For those of us who understand what Standard & Poor does, there are two items of information that are slightly consoling. First, that S&P is just one of many credit rating agencies and the others are not following suit. The Treasury Department is pointing out flaws in the report's methodology already. Secondly, these are the same groups of people who never saw sub-prime mortgage bundles as junk investments, and we all know how that worked out. With their track record, perhaps being downgraded is a good thing, since they cannot read the future.

I'm not going to get into what caused the downgrade right now, but I'm thinking it's a combination of the Tea Party being willing to hold the economy hostage, the unwillingness to increase revenues (i.e. taxes), and the rippling effects of cutting government spending to income and health of private sector business (and their ability to pay taxes). What gets me, is that if US Government bonds are no longer the safest possible investment, what is?

Prepare for a bumpy ride, my friends.

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