The decision by the S&P to downgrade America's credit worthiness from "stable" to "negative" — a potentially predictive move that sets the stage for a possible downgrading of America's Triple A bond rating — is in a word, scary.
This is more than economic mumbo-jumbo from big mouthed partisans in Washington, DC. This is the smartest bean counters in the world (the people who make decisions that drive the very flow of capital across the expanse of the entire globe) sounding the fiscal siren on a sluggish super power that is stumbling in the direction of grave fiscal peril.
From the Financial Times:
Standard & Poor’s issued a stark warning to Washington on Monday, cutting its outlook on US sovereign debt for the first time and throwing more fuel on the raging debate over America’s swollen deficits.
The agency kept America’s credit rating at triple A but for the first time since it started rating US debt 70 years ago, cut its outlook from “stable” to “negative”. A negative outlook means there is a one-third chance of a downgrade in the next two years.
…The cut also reflects deep uncertainty about whether the polarised US political system is capable of thrashing out a deal to tackle the long-term fiscal costs of an ageing population.
Anyone who views the nation's current deficit crisis in anything less than existential terms is fooling themselves. The fiscal circumstance of the nation is grim, and forget the 2012 election…there is a whole lot more riding on the outcome of all this.
The most compelling bit of analysis from the econometrists at the S&P? Their worry that the American political process may be incapable of finding a political solution to its debt crisis.
After Barack Obama invited Congressman Paul Ryan to his speech on deficit reduction all for the purpose of calling Ryan a coward, well, we can't say that we blame the S&P.
We can, however, blame Barack Obama. In 2008, critics like ourselves scoffed at the notion that Obama would be an influential President. Today, as warnings from the S&P and other dispassionate viewers experts scream louder, we must observe: little did we know how wrong we would be.