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The Wall Street Journal provides
a thorough examination of
yesterday’s S&P downgrade
of the rating outlook for U.S. debt
in this story
in today’s paper that includes the graphic below showing where we stand on our credit rating, outlook, and debt. As many analysts have noted over the
last 24 hours, the warning would
carry a lot more weight if the ratings firm hadn’t done such a poor
job in assessing mortgage
securities just a few years ago.
 
Officials in Japan voiced
confidence in U.S. Treasuries, though
the Chinese government
has yet to offer an
official reaction to the news, however,
the head of their largest credit rating agency said the move was well deserved
(according to this WSJ item,
he said, “the U.S.’s actual debt repayment ability has already collapsed”). Yikes!
Meanwhile, American economists poo-pooed the whole idea of the U.S. losing its AAA credit rating, offering markets the assurance that it’s virtually impossible for America
to default on its debt because said debt is denominated
in dollars and we can print as many of those as we desire,
a view that, sometime in the not-too-distant
future may prove to be another example
of how conventional wisdom
is often wrong.
Tim Iacono
Iacono Research.com
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