Monday’s Wall Street Journal opinion article, America Gets Downgraded really hits the nail on the head:
Friday’s downgrade by Standard & Poor’s of U.S. long-term debt… will be the first of many such humiliations if Washington doesn’t change its economic and fiscal policies. Investors and markets & not any single company’s rating & are the ultimate judge of a nation’s creditworthiness. And after their performance in fanning the credit and mortgage-security mania of the last decade, S&P, Moody’s and Fitch should hardly be seen as peerless oracles. Their views are best understood as financial opinions, like newspaper editorials, and they’re only considered more important because U.S. government agencies have required purchasers of securities to use their ratings. … Yet is there anything that S&P said on Friday that everyone else doesn’t already know? S&P essentially declared that on present trend the U.S. debt burden is unsustainable, and that the American political system seems unable to reverse that trend. This is not news. …
Reading that article (not necessarily the quote above) reminded me of something one of my business profs said back in my college days: Nothing is worth more than someone is willing to pay for it. The President can make all the speeches he likes decrying people who made the call on the downgrade of the US credit rating and saying that their opinion doesn’t matter, but it doesn’t change the fact that there are solid reasons behind the downgrade. Obama talked a good game during the election, positioning himself as a moderate, but his actions since entering office have business owners & investors on edge; the pervasive uncertainty in the business community is what’s keeping the economy down. I don’t see much hope of things getting better as long as Obama is in charge.
Tags: downgrade, economy, standard and poors