In case you missed the news from Friday night, S&P: downgraded the USA’s credit rating. And further undermining their credibility they apparently made a substantial math error in their calculations (via Reuters):
“The Obama administration attacked the credibility of the analysis underlying Standard & Poor’s decision to downgrade the United States’ top credit rating on Friday, saying it had found a $2 trillion error.
S&P was forced to remove the number from its analysis after Treasury officials discovered that the rating agency’s estimates of the government’s discretionary spending was $2 trillion too high, sources familiar with the discussions said.
There was evident dismay, and some anger, within the Obama administration at S&P’s decision to downgrade U.S. debt despite the errors officials said they had found in the calculations.
“A judgment flawed by a $2 trillion error speaks for itself,” a Treasury spokesman said after S&P cut the long-term U.S. credit rating by one notch to AA-plus on concerns about growing budget deficits. For more on S&P decision.”
This has reached the point where the ratings agencies are essentially meaningless. Not only is it ridiculous that we are rating the ability of the USA to pay liabilities denominated entirely in a currency they can print, but between the credit crisis and this latest folly it’s hard to make an argument that these companies matter.
And it’s no longer just MMTers who are making this argument about currency denominated in USD’s which renders the solvency discussion a moot point and makes inflation the true focus. Warren Buffett was interviewed on Fox Business after the ratings downgrade and sounded as though he’s been reading some of the MMT content (via Fox Business):
“I don’t get it,” Buffett told FBN late Friday night. In fact, Buffett reaffirmed his belief in the quality of the United States’ credit telling FBN, “In Omaha, the U.S. is still triple A. In fact, if there were a quadruple-A rating, I’d give the U.S. that.”…”We just filed our 10Q and we have $47 billion in cash and cash equivalents. Well over $40 billion of it is in short end T-bills. (Tonight’s S&P downgrade) doesn’t tempt me to sell. We’ll stay right there.”…”Think about it. The U.S., to my knowledge owes no money in currency other than the U.S. dollar, which it can print at will. Now if you’re talking about inflation, that’s a different question.”
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Source: Fox Business