US AAA credit rating downgraded

[alfred russel]

I'm not sure about your history if we are limiting this to fiat money without pegs or other ties to commodities or currencies, but it really doesn't matter. It seems to me that you are assessing a liklihood of a decision to default rather than an economic condition that will make default necessary. Countries have been known to go into hyperinflation too.

Well, if you're going to get all philosophical about it, all defaults are ultimately choices.  I've never heard of a country that defaulted because its debt service exceeded its GDP.

Why would a country default because its debt service exceeds GDP, when it could just print more money?

[Admiral Yi]

Why would a country default because its debt service exceeds GDP, when it could just print more money?

Why would a country go through the hassle of hyperinflation when it can just default?

[Princesca]

This is a summary paragraph from the full S&P report if anyone's interested:

"We lowered our long-term rating on the U.S. because we believe that the
prolonged controversy over raising the statutory debt ceiling and the related
fiscal policy debate indicate that further near-term progress containing the
growth in public spending, especially on entitlements, or on reaching an
agreement on raising revenues is less likely than we previously assumed and
will remain a contentious and fitful process. We also believe that the fiscal
consolidation plan that Congress and the Administration agreed to this week
falls short of the amount that we believe is necessary to stabilize the
general government debt burden by the middle of the decade."

[alfred russel]

Why would a country default because its debt service exceeds GDP, when it could just print more money?

Why would a country go through the hassle of hyperinflation when it can just default?

You have worn me down. 

[MadImmortalMan]

Ten years and three levels too late. We deserve a BB+.

[Neil]

Exactly.  Not enough tax increases.

[citizen k]

Exactly.  Not enough tax increases.

Not until spending is cut to 1790 levels.

[Scipio]

Ten years and three levels too late. We deserve a BB+.

ar is right in that this is essentially meaningless.  When the market tanks, and everyone runs to T-bills, this should be an indicator that everything else is at least one order of magnitude more fucked up than the US economy.

If it weren't, we'd be subject to Canadian monetary hegemony.

[alfred russel]

I wonder if S&P is going to keep anyone with significant exposure to the US government at a AAA rating.

[citizen k]

http://www.businessinsider.com/the-last-aaa-countries-2011-8#safe-aaa-rating-1

[Scipio]

I wonder if S&P is going to keep anyone with significant exposure to the US government at a AAA rating.

What, then, would S&P's rating be, if they issued corporate bonds?

[alfred russel]

I wonder if S&P is going to keep anyone with significant exposure to the US government at a AAA rating.

What, then, would S&P's rating be, if they issued corporate bonds?

AAA if rated by S&P, junk if rated by Moody's or Fitch?

[Barrister]

Ten years and three levels too late. We deserve a BB+.

ar is right in that this is essentially meaningless.  When the market tanks, and everyone runs to T-bills, this should be an indicator that everything else is at least one order of magnitude more fucked up than the US economy.

If it weren't, we'd be subject to Canadian monetary hegemony.

Soon... soon...

[Scipio]

I wonder if S&P is going to keep anyone with significant exposure to the US government at a AAA rating.

What, then, would S&P's rating be, if they issued corporate bonds?

AAA if rated by S&P, junk if rated by Moody's or Fitch?

And I rest my case.  Fiat currency is the toilet papier-mache of self-deception.

[Zanza]

I wonder when France and Germany will be downgraded over the Euro bailouts.