Standard & Poor's made a tiny $2 trillion mistake when rating the US economy

[NJ5]

enrageorange said:

HappySqurriel said:
The United States federal government is like a household that earns $60,000 per year, while spending $90,000 per year, and has a net debt of $300,000 ...

Regardless of the projections of where they will be a decade from now, the United States federal government's bonds are not a AAA investment; and I would argue AA+ is an optimistically high rating.

useless comparision. We can argue all day about the state of the economy, debt, etc. but the S&P is suppose to rate governments based on their likelyhood of paying off the interest on their debt in the near future, and there is a 100% chance the USA will do so which investors see despite the absurd S&P downgrade as they have been swarming towards buying US bonds despite the downgrade when the stock market sharply fell the past few days.

That's not true. S&P has a separate rating for short-term debt, the more commonly known debt rating is for long-term bonds (you do know the U.S. government has a 30-year bond, right?).

I think the reasons why people are still swarming to US bonds are:

- expectation of a crappy economy for the next two years or longer (which is why the U.S. Federal reserve yesterday promised low interest rates for two more years). This gets money out of the stock market into bonds.

- the fact that the U.S. bond market is so big. The bond market of other countries is not big enough to absorb all the cash people want to put into bonds.