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They were downgraded on "willingness" to service their debt. Not ability. Notice that after the downgrade, interest rates went down. What does that tell you?
by bubbleRefuge 14y ago
They were downgraded on "willingness" to service their debt. Not ability. Notice that after the downgrade, interest rates went down. What does that tell you?
- crusso 14y agoNo, willingness to pay debt was never at issue. That was a red herring put out by the Administration and lapped up by an unquestioning media. We take in more than enough on a monthly basis to service our debt. Willingness to increase the debt ceiling to pay for government programs that we haven't actually borrowed the money for yet was the issue. Interest rates are down worldwide and has more to do with inflation and "the savings glut". They say nothing particularly positive about the US Government's credit worthiness.
- mncolinlee 14y agoLike the authors, you have causality backwards. You're implying that I cannot find an example where inflation was almost 15% and interest rates were over 16% back in the 1980s. Fed interest rates were lowered after the 2008 crisis to limit deflation. Inflation did not cause low T-bill rates. In fact, logic would dictate that high inflation would increase Treasury rate expectations and the demand for inflation-protected TIPS. The reason interest rates were low after Congress nearly defaulted on their debts is because federal bonds were considered a safer risk/reward than the markets. Wall Street trusted our treasury to pay its interest this last year more than they trusted blue chips to both hold their value and pay dividends with an unstable recovery. They were even holding onto T-bills while losing to inflation at times.