Photo: Alex Bailey
The best response yet to S&P’s downgrade of the US comes from Paul Donovan at UBS.Stone Street Advisors posted an email note he sent out this morning.
“I come to bury US creditworthiness, not to praise it
+ The noble credit rating agency S&P has said there is a one in three chance of a US downgrade within two years. The US can print its own money, and the cost of printing is less than the cost of default. But S&P are intelligent men.
+ The US has no history of coups, repudiating domestic debt. Credit ratings are supposedly an assessment of relative risk and yet there was no comment on France, nor on Germany or the UK. But S&P are intelligent men.
+ Given a choice between abandoning the world’s most liquid and most widely held bond market, or abandoning credit rating agencies as arbiters of portfolios, most investors will likely chose to abandon the agencies. But S&P are intelligent men.