Standard & Poor Lays a Smack-down to U.S. Government

Wall Street had of its worst weeks, losing nearly all gains in 2011. 

As many of you have probably already heard about, Standard and Poor (S&P) has downgraded the U.S. credit rating from the highest rating of AAA to a AA+ rating this past Friday. This is the first time the United States has faced a downgrade and it has sent tidal waves throughout the financial market. Given that Europe is suffering major levels of adversity with Greece possibly heading for a default just months after it receive a major bailout by the IMF, and with unemployment in Spain for youth at nearly 46%, this is just another piece of bad news for the Western World. China, the United State's largest creditor was quick to criticize the United States, saying that "the U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone," this according to an official Chinese news agency. (For more click here) Additionally this rating drop only fuels the international debate for a change in base currency from the dollar. These may be the signs that the fall of U.S. hegemony is coming faster than we thought and possibly China's surge may quickly take over the financial leadership of the world. Of course, they have problems of their own, which is a story for a later time. 


Now, who is to blame for this debacle we are in? Keeping in mind there is no single entity. One very important agency in the financial sector has an opinion. In an interview with CNN's Anderson Cooper last night, John Chambers the Chairman of S&P's Committee on Sovereign Nation Ratings quietly, and in a very calm demeanor delivered some harsh criticism of U.S. policy makers (watch interview here). Chambers is a very technical and calm man, not much of a T.V. personality type, and if there were any doubts about what he was saying with his tone, they were immediately cleared up by the official memorandum released by S&P (read the document here). Here is quote from the rational section of the memo: "the political brinksmanship of recent months highlights what we see as America's governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed." Not to lay any more criticism, but it is followed by "our (S&P) opinion is that elected officials remain wary of tackling the structural issues required to effectively address the rising U.S. public debt burden in a manner consistent with a 'AAA' rating." Ouch, for a very technical document, made by guys that have many friends in Washington and on Wall Street, those are some direct and stinging words. The thing about it, S&P couldn't be any closer to the truth. 


This really has become a major wake up call for the U.S. Government. So while they are on summer holiday, they really need to be managing their constituent bases, communicating with each other, and finding the correct policy to align this nation out of this momentous hole we have dug ourselves into. Now, that is unlikely to happen. Grudges don't die easily in Washington and with the 2012 election year ramping up, the pundits on both sides fueling the fire, I can only hope that we as a nation are better at the end of the day, and not just the political career of some so called representative.