More about the S&P downgrade

Yeah, its old news now, but events contrive to support the view of Standard and Poors in downgrading the debt of the US.

S&P said this, bolding mine:

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. The statutory debt ceiling and the threat of default have become political bargaining chips

Now, this week, we have had one of the two major political parties sending an official letter to the Fed that in effect requests the Fed ignore its mandate for the next 15 or so months. Dangerous ground indeed; if investors form the opinion that the central bank of the US is beholden to the whims of politicians seeking re-election in any way they can (even if this involves trashing the US economy and people) they may well form the opinion that

America’s governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed.

A loss of confidence in the independence of the US central bank from marauding politicians increases the danger of another severe fall in the US stock markets and another severely damaging blow to the fragile US economy.

Standard and Poors comments are looking increasingly prescient by the day.

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