Standard & Poor’s thinks the U.S. no longer deserves a triple-A credit rating. The Treasury market disagrees and so does David Levey, former managing director, sovereign ratings, at Moody’s (1985-2004). Rajiv Sethi, professor of economics at Columbia, has the details.
Daily Archives: August 8, 2011
The Market Can’t Get Enough Of Those Downgraded Treasuries
The stock market was crushed today, with the S&P 500 falling nearly 7%. The proximate cause of the mayhem: Standard & Poor’s downgrade of the U.S. government credit rating. But a funny thing happened on the path to demoting Treasuries: prices of these tarnished securities soared.
Is Battling Deflation The New New Thing Again?
The week ahead will surely be a stress test. Friday’s downgrade of the U.S. credit rating, although hardly a surprise, seems to have unleashed a higher round of risk aversion in world markets. Equity prices are tumbling around the globe, and early indicators suggest that no less is in store for stocks in the U.S. today. What’s the economic logic behind the selling? The main worry is deflation. Yes, it looked like that problem was solved. Many analysts have continued to scream that inflation was the main challenge ahead. But the one-two punch of deleveraging and slow growth that has plagued the U.S. and mature economies never really went away. These risks were always lurking in the background, waiting to re-emerge, if and when there was a new catalyst.