Well the big news is that S&P has downgraded US Government debt. In true form for Standard and Poors, the rating agency made a $2 trillion math error which was quickly pointed out to them by the White House. Still they proceeded with the downgrade. Ironically, S&P played a big part in getting us in this sorry mess because of their worthless ratings of mortgage backed securities.
The truth is, as several commentators have pointed out, that the debt should be downgraded, not because the US doesn't have the money to pay its bills but because there has emerged a political willingness to use default as a bargaining chip. The reason the debt has been downgraded is largely because the tea party crowd refused to increase the debt ceiling (something that was done frequently and without fuss in prior administrations). Their action has shown the markets that default is now a possibility. It's hard to know what the costs will be in terms of higher interest rates, but what is clear is that this is not what the US economy needed right now.
A Finance Professor's blog. I am a Professor of Finance in the Poole College of Management at NC State University. My website: https://sites.google.com/ncsu.edu/warr Opinions are my own.
Subscribe to:
Post Comments (Atom)
What's going on with inflation?
I recently posted an article on the Poole College Thought Leadership page titled: " What's going on with inflation?" . This w...
-
A recent paper by some computer science folks at Indiana finds that the mood on twitter can predict movements in the Dow Jones Industrial A...
-
I recently posted an article on the Poole College Thought Leadership page titled: " What's going on with inflation?" . This w...
-
Another inflation illusion post. This time with math. Again the issue here is that you can't just increase the discount rate when you a...
No comments:
Post a Comment