When Standard & Poor's downgraded the U.S. credit rating earlier this month pundits and politicians claimed this would cause interest rates to spike and kill what little lending there was in the economy. However, the opposite has happened. Interest rates on Treasury bonds have actually fallen and T-bills continue to lead the flight to safety during the recent market turmoil.
What does it all mean?
"It just emphasizes the irrelevance of the ratings agencies," says Jesse Eisinger senior reporter at ProPublica and longtime critic of the ratings agencies. "I think this was a watershed moment for how unimportant the ratings agencies are."
As The Daily Ticker's Aaron Task and Eisinger note in the accompanying clip, the market's reaction to the America's loss of AAA rating is similar to the reaction when it happened to Japan earlier this decade - nothing. Japan, downgraded in 2002, still enjoys some of the lowest borrowing costs in the world. (Earlier this week, Moody's downgraded Japan'sRead More »from Reaction to U.S. Downgrade Shows Just How “Unimportant” Ratings Agencies Are, Eisinger Says