S&P Cuts its Outlook on US Treasury Securities.
My only comment is – Why did it take so long? If one were objectively evaluating the level of debt and risk, this should have occurred a while back. A key lesson that we need to learn from the recent financial crisis is that when the market forces are prevented from acting as a disciplinary force (either due to crony capitalism or regulatory capture or improper incentive structure), and unsustainable policies are allowed to persist, the ultimate shock/crisis is likely to be very painful. The atrocious performance of rating agencies prior to the financial crisis has carried over to the present ... their evaluation of sovereign debt quality is at times ridiculous. How long can you run trillion dollar plus deficits and still retain AAA ratings?
There is an obvious conflict of interest when it comes to sovereign states such as the US and UK:
trying to be objective in evaluating the debt issued by the regulator (the government is the ultimate regulator) is likely to be difficult. This is why we need more than three rating agencies (especially when they are geographically concentrated). See previous post on this issue.
There is an obvious conflict of interest when it comes to sovereign states such as the US and UK:
trying to be objective in evaluating the debt issued by the regulator (the government is the ultimate regulator) is likely to be difficult. This is why we need more than three rating agencies (especially when they are geographically concentrated). See previous post on this issue.