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Good article, Chris. Here's a response piece. What's the government going to do? This was a big wake up call for them. However some think it was an empty threat and still support the government.
"He said there was “no risk” that the United States would lose its AAA credit rating and that investors were still confident in government bonds, strongly disagreeing with the negative assessment of the nation’s outlook by the Standard & Poor’s ratings agency."
China is skeptical; "China’s foreign ministry said in a statement on its Web site on Tuesday that the United States must take “responsible” measures to protect investors in its debt."
Japan is still supportive of government bonds. Your thoughts?
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Rogoff has a great quote on this on page (p. 232) “As shown in figure 14.6 sovereign default, debt restructuring, and/or near default (avoided by international bailout packages) have been a art of the experience of financial crisis’s in many emerging markets; therefore, a declined in a country’s credit rating during a crisis hardly comes as a surprise.”
ReplyDeleteSeems like the U.S is not immune to such things even though it is considered risk less.