Gerry Canavan

the smartest kid on earth

End of the World Blues

with 5 comments

So what happens if the U.S.’s bond rating does get downgraded? Some 7,000 top-rated munis would be automatically downgraded if the U.S. government lost its AAA rating. In addition the credit ratings of a host of state and local governments, housing bond programs, higher education and non-profit institutions, and other entities dependent on the federal government would be reviewed, Bloomberg reports. 

And it could get much worse than that. There are huge swaths of the global economy that are predicated on the idea that the U.S. government will absolutely never default. Additionally, there’s no telling what sorts of CDS-style time-bombs and investment-product doomsday machines are out there waiting to be triggered if the U.S. were to be downgraded as a result of all this political posturing. Recall that the stock market crash of 2008 was triggered in large part by the downgrading of a single firm’s credit rating. The U.S. is orders of magnitude more important to the world economy than AIG.

In short, the Republicans have completely lost their minds.

5 Responses

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  1. Fiddling while Rome burns.

    Pete

    July 14, 2011 at 2:30 pm

  2. […] a 50 percent chance it will downgrade US credit rating within 3 months. This is really, really […]

  3. […] Klein on my broken record: If the federal government’s borrowing costs rise, so will everyone else’s. Mortgages rates will […]

  4. […] the Atlantic. #13 in particular is the one that’s got my hair on fire, in no small part because it gives us #7, 8, 9 as a […]

  5. […] debt ceiling completely is now the only way left to calm the markets and prevent a potentially catastrophic downgrade: Asian stock markets fell Thursday as uncertainty over the U.S. debt ceiling debate […]


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