

If US loses triple-A, its citizens will pay - bakbak
http://economictimes.indiatimes.com/news/international-business/if-us-loses-triple-a-its-citizens-will-pay/articleshow/8023609.cms

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TomOfTTB
Can we be real here?

If they were to downgrade the U.S. credit rating they'd be shooting themselves
in the foot. Because the dollar would plummet and the dollar is still the
world's reserve currency.

And as the article itself says...

 _"One of the reasons why the U.S. dollar is still the reserve currency is the
lack of other options, and in two years there may still be no other options,"
said Tom Simons, a money market economist at Jefferies & Co. in New York._

The only real competitors are the euro (Europe has bigger problems than the
U.S. does) and the Yuan (I'm sorry but most countries aren't going to trust
China as the keeper of the default currency).

So what is S&P really up to?

They're trying to influence policy. S&P released the same warning in regards
to the UK and the result was a flurry of austerity programs. Clearly they're
hoping for the same result here.

I don't disagree with that goal by the way. I'm just saying call a spade a
spade. This is a naked attempt to influence policy

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nhaehnle
I am genuinely curious: What does S&P claim their credit rating reflects?

It is obvious that the US government will always be able to pay both interest
and principal on treasury bonds, because they are the ones who run the
monetary system: they are sovereign. There is no way that they could ever
become unable to fulfil their contractual obligations. To believe that the US
government may become unable to pay out US$ is as absurd as believing that
Blizzard may become unable to pay out World of Warcraft in-game gold.

So again, what is it that S&P claims to be measuring?

There is a chance that the US government defaults voluntarily for political
reasons, whatever those may be - is it that possibility that S&P claims has
now increased? Or something else that I am missing?

The reporting reads as if the US government is subject to the inability to pay
like some private borrower, or like non-sovereign countries like Greece. But
that is not the case. So what gives?

Edit: This confirms my suspicions and also the sentiment voiced by the sibling
comment: [http://www.nytimes.com/roomfordebate/2011/04/18/is-anyone-
li...](http://www.nytimes.com/roomfordebate/2011/04/18/is-anyone-listening-to-
the-standard-poors/ignore-the-raters)

