Credit Downgrade: Good News for the U.S.A.

Wall Street is in free fall. World financial markets are in turmoil. Everywhere you turn the economic news is scary and the U.S. credit rating has been downgraded for the first time in it’s history.

Furthermore, federal government gridlock appears powerless to do anything about it.

DOW Industrials July 25 to Aug 5 - Yahoo Finance

This is the best possible outcome for our country!

That is because our dirty little debt secret is finally under the spotlight for all to see. Up to now we could pretend it wasn’t there. Over the last 11 years this country has tripled its debt load and it is burgeoning at a rate of $3.67 billion per day.

We can clearly see our target in our sights.

Our debt-to-GDP level has risen so high that Standard and Poor’s finally said out loud what everyone already knows,  our nation’s debt level is dangerously high and our federal government is unwilling to do much about it either in the short term or in the long term.

The credit downgrade forces us, for the first time, to admit that we have a debt and deficit problem. If we take serious steps to reduce both, then we will recover and prosper. It will take years. It will be painful.

But Americans are a resilient and innovative people. The average American is willing to take our lumps and accept what is necessary to make a course correction to our ship of state that sails us out of the tempest.

However, if “We the People” allow politicians to continue to deny the problem, point fingers at each other and let political gridlock rule the day, then we are doomed.

Shoot The Messenger

The first lesson politicians and political pundits need to learn is that trashing the bearer of bad news does not cure the problem.

Misinformation about Standard and Poor’s is everywhere… The S&P is in cahoots with the Tea Party… S&P is amateurish… S&P’s math was wrong… The debt-to-GDP level is meaningless… S&P’s track record is abysmal. It goes on and on and on.

Demean the bearer of bad news when you don’t like what they say. That is our political modus operadi.

The problem with that approach is that deniers deflect the discussion away from the real problem – American debt and deficits are out of control!

Don’t believe everything you hear editorialized on TV and read in newspaper op-eds. Judge things for yourself.

Here are two places where Standard and Poor’s actual reasoning for their credit downgrade is explained:
S&P USA Downgrade to AA+ Analysis“, Standard and Poor’s, 8/5/2011
Video Interview of S&P’s John Chambers“, CNN, Anderson Cooper, 8/6/2011

The Bottom Line

Standard and Poor’s credit downgrade is our wake up call.

The sooner we acknowledge the problem and take corrective action, the sooner we will recover.

The longer we wait the worse it gets.

Denial got us where we are today. Denial won’t make it go away.


About azleader

Learning to see life more clearly... one image at a time!

Posted on Aug 8, 2011, in Credit Agencies, Credit Downgrade, Debt, Deficit, GDP, Gross Domestic Product, National Debt, Politics, Standard and Poor's. Bookmark the permalink. 3 Comments.

  1. Damn, it’s good to see there is at least one person who agrees with me. The Dow-Jones fell another 635 points today because markets are finally waking up to the fact that Europe and the US can not deal with their debts if their economies aren’t growing and they are doing next to nothing to change the tide. Investors are flocking to the US bonds as THE only save haven, so the down grade for now is having no affect on our cost of borrowing, Hopefully the market reactions will force this new “Super Committee” to come up with a serious plan that the markets and the rating agencies can believe in.

  2. Its clear from the reactions to today’s events that there will be no consensus, no agreement and no bipartisanship.

    No meaningful short, middle or long term solutions to our nation’s debt/deficits will be forthcoming.

    The “Super Committee” is doomed to failure.

    Campaigning for 2012 has taken over DC and we still face a big political fight over the 2012 budget. No budget will be passed before October 1st when the 2012 budget year begins.

  1. Pingback: Economic impact of the credit downgrade «

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