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  • mayerbci mayerbci Aug 13, 2011 9:05 AM Flag

    it was all a joke

    Yes people and politicians overblow issues. The US would never default because it has enough money to pay the interest on the debt with the current revenues. Plus, the US government can print money (or should I say digitaly create it).

    However, downgrades are not without merit. As an countrys debt keeps rising there comes a point when their debt situation is less secure. If a persons Equifax score was 840 and dropped to 820 that person will have little if no change in their possibilities to receive more debt. Same as countries.

    The problem I see is that people and the media cannot see the many shades of gray. It is not an all or nothing game. Plus long-term rating is quite diffrent form short-term. AA+ and AAA long-term are both A-1+ short-term. Meaning the US short-term view has not changed.

    This is a good link to understand ratings.

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    • Seems like Greece and Italy have the same problem. Half the people who are supposed to pay taxes don't. Seems like they are in this position because through the good times and bad they just borrowed when they should have just raised taxes during the good times in preparation for the cyclical bad times. Seems like the ancient adage about the grasshopper and the ant is still true after 2,000 years. Denying, deferring, or ignoring the bad times by pretending good times never end (cyclically) is crazy. Seems like politicians are the same the world over. They live in million-ton castles in the air and depend on hot-air to keep it afloat. It doesn't help that Italy's prime minister is a billionaire and many are interested in keeping him there. (no taxes). The Hellenistic Republic next door is in no better shape as they make nothing the world wants to buy during the hard times. And increasing taxes on those who already pay taxes, while ignoring those who do not is no solution.