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The downgrade is because the US Gov is spending far more than it's taking in. In other words, it's for the same reason that every other person / business / gove
by miked 15y ago
The downgrade is because the US Gov is spending far more than it's taking in. In other words, it's for the same reason that every other person / business / government gets downgraded. It's important to realize that there's no magic here.
- pyoung 15y agoYou cannot compare 'person' and 'business' with government. The government has the ability to print money, whereas the other two do not. The only reason they don't print money to pay off all their debts is because it will result in massive inflation. The reason the European debt crises is so serious is because the adoption of the euro means that no individual contry can print their own money to avoid default.
- veyron 15y ago"The reason the European debt crises is so serious is because the adoption of the euro means that no individual contry can print their own money to avoid default." It's more because each individual country issues bonds. The ECB can't issue debt.
- pyoung 15y agoI am not sure I agree. The primary difference between pre and post EURO Europe is that, individual EURO countries no longer control their own currency. In times of economic crisis, countries can manipulate their currencies to make their economies more competitive internationally, and/or inflate their way out of a debt crisis. Despite what the media is saying, the U.S. is not in a debt crisis, we have many tools at our disposal to prevent default, including currency manipulation. The EU on the other hand has a handful of countries that are in serious jeopardy of defaulting.
- usaar333 15y agoInflating your way out of debt is as bad to debt holders as a (partial) default.
- pyoung 15y agoI agree that is bad for debt holders, but from a political stand point, it is easier to gradually print money to devalue your debt than it is to default.
- count 15y agoDoes that hold true when you're inflating the reserve currency?
- cgp 15y agoyou can't assume that printing money here will incur inflation, as money is being just sucked up by the system right now - a lot of it in the form of housing prices falling (and thus falling off the assets sheets of banks)