Saturday, August 6, 2011

S&P Downgrades US 10 Year Debt to AAa

link here to article

S&P dropped its AAA rating on 10 year treasuries below AAA for the first time since 1941. This does not affect shorter term treasuries held by money market funds and it does not affect the status of 10 year treasuries held by banks. The banks will still be able to hold them as perfectly safe assets.

S&P downgraded the US bonds because they do not believe that the US Congress is functioning in a manner that will allow the government to address its medium term debt problems. Ordinarily, a bad economy is the problem that causes a downgrade. S&P is confirming a problem that 82% of Americans recognize. The US political system is operating like those in third world countries which do not have AAA ratings.

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