STRIPPED: What the Credit Downgrade Means

Sunday, August 7, 2011, 2:08 PM
Enroll NowFor enrolled members only. Enroll or Sign in to read the full article.

I wrote about a possible credit downgrade on July 28th and split the probable reactions and consequences into what should happen and what (most likely) will happen. Lately, and with good reason, we’ve all become conditioned to the idea that what actually happens in the financial markets is not what should be happening.

Take this latest move. Nothing that the S&P has done by downgrading US long-term debt obligations from AAA to AA+ has done anything to change the fundamental math of the equation. The US is just as insolvent after the downgrade as it was before the downgrade.

But in a fiat money system, faith is very important, and what just took a big hit was the perception of safety that surrounds US Treasury debt. Further, the downgrade came at a rather awkward time for the financial markets. I suppose there’s never a great time, but some times are a little worse than others, and the financial markets are already highly unsettled after a few weeks of piss-poor economic data signaling the arrival of another downturn and a rising debt crisis in Europe that is still devolving rather than healing.

Here’s a good reader observation and question to which I’d like to respond:


Enroll Now
Or Sign In with your enrolled account.
Endorsed Financial Adviser Endorsed Financial Adviser

Looking for a financial adviser who sees the world through a similar lens as we do? Free consultation available.

Learn More »
Read Our New Book "Prosper!"Read Our New Book

Prosper! is a "how to" guide for living well no matter what the future brings.

Learn More »


Related content

96 Comments on STRIPPED: What the Credit Downgrade Means

Enroll now or Sign In to read all member comments.