Back in July, Standard and Poors issued a courteous warning: if the US did not have a plan for reducing it’s debt by $4 trillion over the next 10 years, the US would no longer merit S&P’s best credit rating. Washington managed (just barely) to produce a plan for reducing the debt by only $2.4 trillion, even assuming the existence of fiscal unicorns and the growth fairy. S&P did as promised and downgraded our national credit rating. The White House was, of course, shocked and appalled – who new some outfits actually did what they said they would do? This was, apparently, an uncustomary paradigm for the White House.
Subsequently, the markets went into wild fits. I suppose it’s OK for everyone to know that Uncle Sam resembles a sub-prime borrower as long as everyone pretends otherwise. But now it’s out in the open and no one’s sure what to do with Uncle Deadbeat, especially there are some real deadbeats across the pond. Uncle doesn’t look too awful by comparison, but it’s kind of like being the prettiest girl at the Wallflower Dance.
With more downgrades on the way (I’m talking to you, France), things could get interesting.