As most folks know, the USA was downgraded from a AAA credit rating to AA+. Based on our spending, debt and leadership, a strong case can be made that we deserve that rating. That said, the fact that Standard & Poor rated us is a point of concern.
Some folks will recall that Standard & Poor played a significant role in the economic collapse that contributed to America’s current plight. As others have noted, it gave AAA ratings to some of the most crap filled Collateralized Debt Obligations. Misled by the AAA ratings, some investors bought these time bombs believing that they were quite safe. However, as history has shown, they turned out to be financial death traps. More recently it was revealed that S&P based its review on figures that turned out to include a $2 trillion error. While S&P claimed that these figures had no impact on their rating decision, that seems to be a rather absurd claim. After all, the financial figures would seem rather critical to bestowing a financial judgment.
In light of these facts, there seem to be good grounds to be concerned about S&P. One possibility is that the people working at S&P are incompetent and unable to discern good from bad or do calculations properly. If so, their rating (which has proven rather damaging) should be reconsidered. Another possibility worth considering is that the folks at S&P are not acting from incompetence, but have issued the lower rating because doing so is advantageous (directly or indirectly) to the company. While the lower rating does seem to be damaging, it also provides considerable financial opportunities for those in a position to take advantage of it. Given S&P’s role in the meltdown and its “error”, it might be suspected that they are up to something.
One general point of concern is that S&P is a private company that has great power over the world economy. However, its decisions are not subject to review and it is not answerable to the rest of us. Given its role in the meltdown and its current downgrading of the American credit rating, this seems to be a concern worth considering.