Default still seems unlikely, but more and more are getting resigned to the idea that the US will likely soon lose its AAA rating.
In addition to expecting a downgrade, there’s been a lot of rationalizing about how it wouldn’t be all that bad if it happened, which definitely stands in contrast to the old presumption that a downgrade would be crushing.
One good reason to note worry (too much). There just isn’t that much in the way of AAA-rated alternatives.
Matt Yglesias posted this chart today:
If you eliminate France and Germany — which can’t POSSIBLY be that safe, given that they’re not sovereign currency issuers and are exposed massively to their peers — the US share of the AAA-rated pie grows even larger, which means that a downgrade of the US AAA rating, would really just require everyone to grade on a curve. There’s just nowhere to fly to in a flight to quality.
There could be issues, but by the sheer dint of its size, US debt has a lot going for it.