Standard and Poors are a little late coming on board in political realities. On board, that is, in learning that America is politically dysfunctional. Better late than never they say. The rating agencies were “never” in the times leading up to the 2008 melt down. S & P now says they have no confidence that our national debt will be fixed or improved by this Congress.
Therefore, they issued a “negative” warning that a downgrade was coming: sooner rather than later. In fact, they issued an ultimatum that debt-remedy action must precede the 2012 elections. The downgrade will make borrowing more expensive and treasurys harder to sell. Pimco, already figured that out, and pulled investing in U. S. treasury bonds. Such action will affect other borrowing and Wall Street is getting excited about the prospect of higher borrowing cost. Wall Street likes free money !
Meanwhile, the main objective of the politicians that S & P has lost confidence in, is getting re-elected. The President has already announced and on the campaign trail. The Baker Machine, here in Tennessee have started too. Sen. Corker, up for re-election has television commercials showing up regularly.
But, politics is a rich man’s business; his primary business. And, rich men are nervous.