Saturday, August 6, 2011

USA Credit Downgrade: Wrong Numbers, Correct Decision

U.S. credit rating = AA+ .

So here we are, four months after Standard & Poor's (henceforth S&P) changed the outlook on the U.S. debt trajectory to "negative."

So here we are, less than a week after an overly dramatized month of haggling, pseudo compromises, and broken backs in what has been labeled as the U.S. debt agreement, errr, imbroglio.

True, S&P may have used wrong numbers, as the U.S. Treasury claims, but that still doesn't change the bigger picture: a tenuous status quo of unsustainable debt that the U.S. has amassed over the course of many years.

The U.S. Treasury's rebuke to S&P is faulty, too. It's kind of like a hooker firing back at someone who has the audacity to say "whore" to her face. She knows it's true, but is in denial about it, hoping the problem will go away on its own.

Alas, it will not. And neither will S&P's outlook change unless the U.S. shows tangible results--less words, more action--to get its profligacy rectified.

As a U.S. citizen, it's unfortunate to see the cost of mortgages, car loans, and other types of credit increase in such anemic times as these. Though other core rating agencies--Moody's, Fitch--have noted they will not follow suit at the moment, the added caveat was that this could change in the future.

Nonetheless, I, and the vast majority of the U.S. population, deep down feel that what S&P did is correct: indeed, who really believes the U.S. deserves a AAA credit rating in 2011?

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