Quote:
Originally Posted by Slava
Well that is all well and good except for a few things: (A) a credit rating is not really a comment on the political climate. Its supposed to be a rating on the likelihood that you can pay your debts. (B) and perhaps most importantly, the US can always print more money. In other words taking the hyper-inflation aspect out of the equation (which is not a concern in the least right now!) its virtually impossible for the US to actually default. They theoretically ought to be either "AAA" or "D" in theory because if they were that close to a default they could turn on the presses...
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In the corporate sense a credit rating is more than just the raw numbers but also a reflection of the company's management's commitment to maintain or improve their rating. S&P is taking the view that the 'management' of the United States either doesn't care enough or lacks the ability to do anything meaningful about the debt situation, hence the downgrade.
The most dangerous thing that can happen as a result of this downgrade is for lawmakers to just say 'FU to S&P' and keep on keeping on. If nothing changes Moody's and Fitch will follow S&P and downgrade the US too, (Moodys has a negative outlook right now and can put them on negative watch for a downgrade again at a moments notice).