Below Grade

"Who are you, tenth man on the deal team, last to know?"
--Gordon Gekko (Wall Street)

This article entertains whether US debt should be downgraded to junk. Because junk bonds relate to a debtor's capacity to repay loans, conventional wisdom says that the US would never default--because it has a printing press.

However, if the US ever DID crank up the presses to pay off what we owe, then perhaps what creditors would receive in terms of purchasing power would approach not getting paid off at all.

Moreover, ratings agencies are typically late to the game when it comes to credit downgrades. 3-4 yrs ago it was readily apparent that the chances of many leveraged institutions paying back their debt was decreasing, yet the ratings agencies did nothing.

When creditor start moving away from US debt, it's a pretty safe bet that ratings agencies will be pulling up the rear as always.

no positions