“The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics,” S&P said in a statement late yesterday after markets closed.
Credit ratings are based on ability to pay and willingness to pay.
David Beers of S&P knows this and has discussed this in the past.
Including direct discussion with me where he acknowledged a nation like the US always has the ability to make US dollar payments.
Therefore any downgrade would necessarily be based on willingness to pay.
In fact, I downgraded the US on willingness to pay several months ago on this website. And the debt ceiling debate more than demonstrated a willingness to default by far too many members of Congress for even consideration of a AAA rating.
So why then did David T. Beers decide to downgrade the US on ability to pay, and not explicitly on willingness to pay?
Sure looks like a case of intellectual dishonesty.
And I have no idea why.
So much for his legacy.
And, as previously discussed, markets probably won’t care, much like when Japan was even more severely downgraded.
A credit rating simply needn’t be applicable for the issuer of its own currency, as David should well know.