Aug

21

Consider how often has S&P made mistakes in the past. S&P missed the Enron crisis, the Lehman collapse, the economic troubles of Spain, Ireland and Greece, the mortgage related bonds before 2008. This time, however, it is different because it seems they overreacted (at least some say so) to the US difficulties in finding the (in)famous debt deal. It is not clear why S&P has decided to expose the US vulnerability to a higher debt level. The risk of backlash to the downgrade is high. The “system” and the environment could now become hostile or, at least, unfavorable. The downgrade was likely “political” rather than the result of a cold and independent analysis. It was the trigger for the stock markets sell off. But it was just the trigger. It is interesting, however, because S&P’s move is a crack in the Wall Street-Washington DC connection. May be just a first crack. On thin ice.


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