Our financial system is crumbling this week.

[Arthur Dent]

Meanwhile, the downgrade has increased federal borrowing costs not a whit. 10 year Treasuries are now trading at even smaller yields, 2.34%. It would be nice if this was noticed for future debt crisis mongering. Investors are in fact clamoring to buy more federal debt.

[IMADreamer]

It's sure pounding the markets though.

[cpebbles]

Yeah, how far can the selloff go when there are no alternatives? I would take issue if your take-home message from this is that the credit downgrade did not have major negative effects.

[Michael]

I wonder how the S&P downgrade will be judged in 20 years. My guess is history will be sympathetic.

[Arthur Dent]

It's sure pounding the markets though.

By "the markets", I assume you are referring to the stock market and not the market for federal debt. If investors were concerned about the ability of the Treasury to make good on its obligations, they would not be pushing interest rates even lower. Falling stock prices, on the other hand, reflect investors' expectations of future corporate profitability. Falling stock prices is exactly what you'd expect to see if investors come to believe that the economy is going to continue to be awful. And they are likely right. We are planning to continue to do nothing to get people back to work while instead focusing on making things worse by slashing spending out of fear of a non-existent short-term debt problem.

[Michael]

It's sure pounding the markets though.

By "the markets", I assume you are referring to the stock market and not the market for federal debt. If investors were concerned about the ability of the Treasury to make good on its obligations, they would not be pushing interest rates even lower. Falling stock prices, on the other hand, reflect investors' expectations of future corporate profitability. Falling stock prices is exactly what you'd expect to see if investors come to believe that the economy is going to continue to be awful. And they are likely right. We are planning to continue to do nothing to get people back to work while instead focusing on making things worse by slashing spending out of fear of a non-existent short-term debt problem.

This cannot be quoted enough.

[Hungary Jack]

Meanwhile, the downgrade has increased federal borrowing costs not a whit. 10 year Treasuries are now trading at even smaller yields, 2.34%. It would be nice if this was noticed for future debt crisis mongering. Investors are in fact clamoring to buy more federal debt.

I agree that there is no liquidity crisis here. We have ample sources of funding in terms of investors demanding treasury bills and bonds at relatively low rates. But our long-term spending and borrowing trajectory is not sustainable, and significant changes are needed.

The recent deal does nothing to address the core of the issue. The Tea Party needs to forget the fantasy of resolving the debt issue without more taxation, and the Democrats that any new revenues are not tickets to more spending. But above all, enough leaders in Congress need to summon the huevos to actually do something about a bad situation that has been 30 years in the making.

[IMADreamer]

It's sure pounding the markets though.

By "the markets", I assume you are referring to the stock market and not the market for federal debt. If investors were concerned about the ability of the Treasury to make good on its obligations, they would not be pushing interest rates even lower. Falling stock prices, on the other hand, reflect investors' expectations of future corporate profitability. Falling stock prices is exactly what you'd expect to see if investors come to believe that the economy is going to continue to be awful. And they are likely right. We are planning to continue to do nothing to get people back to work while instead focusing on making things worse by slashing spending out of fear of a non-existent short-term debt problem.

True, I was speaking generally though, which was a mistake. Corn and other commodities like that are getting hit too.

[Freed Roger]

Meanwhile, the downgrade has increased federal borrowing costs not a whit. 10 year Treasuries are now trading at even smaller yields, 2.34%. It would be nice if this was noticed for future debt crisis mongering. Investors are in fact clamoring to buy more federal debt.

The recent deal does nothing to address the core of the issue. The Tea Party needs to forget the fantasy of resolving the debt issue without more taxation, and the Democrats that any new revenues are not tickets to more spending. But above all, enough leaders in Congress need to summon the huevos to actually do something about a bad situation that has been 30 years in the making.

yep to this. Debt issue isn't the only problem now though.

[Socnorb11]

It's sure pounding the markets though.

By "the markets", I assume you are referring to the stock market and not the market for federal debt. If investors were concerned about the ability of the Treasury to make good on its obligations, they would not be pushing interest rates even lower. Falling stock prices, on the other hand, reflect investors' expectations of future corporate profitability. Falling stock prices is exactly what you'd expect to see if investors come to believe that the economy is going to continue to be awful. And they are likely right. We are planning to continue to do nothing to get people back to work while instead focusing on making things worse by slashing spending out of fear of a non-existent short-term debt problem.

What do you mean continuing to do nothing to get people back to work. That's what the tax breaks for the rich are going to do, haven't yo heard?! Just wait!