Thursday, July 21, 2011

The Ratings Agencies should downgrade US debt

Not that I want it to happen, or think they will do this, but if the ratings agencies are really doing the job they claim, how can they not downgrade the rating on the debts of an organization that is currently engaging in an actual protracted, serious public debate about whether or not to continue honouring its debts?

If you went for a loan, and told the bank that you "might or might not" pay back interest on the loan, and despite having ample financial means to afford it, "would decide later," how likely are you to get the loan? 

Obviously the ratings agencies are trying to read the tea leaves and go along with the CW that "everyone knows the debt ceiling will be raised" but that isn't really their job.   There's really no way to read a fluid political situation like what we're watching and have any certainty about the outcome, and that's really the point, it is no longer certain that on August 3rd, the United States will honour all its debts and obligations on time.  Being too generous with the Triple-A ratings is an important part of how we got into this mess, and I really can't see on what basis the ratings agencies have now to sustain Triple A ratings on the US Federal Government given what it happening. 

Just another reminder that the ratings agency system needs reform. 


  1. A guaranteed payday loans can be obtained even when your credit score is not impressive. In order to obtain this no credit check payday loan, the borrower must fill out a simple application form that is submitted to the lender, once verified, the funds will be issued.

  2. Interesting - though I think my point stands, even if some entities are willing to loan to people with terrible credit scores, declaring that you might not pay back loans is not going to help your credit score.

    Similarly, even if the US is downgraded, or even if it does default, many will still loan it money (at higher interest).