Boehner’s Plan Would Cause Downgrade

Andrew Sullivan —  Jul 26 2011 @ 12:55pm

But Reid's wouldn't, according to S&P:

Daniel Stone reports that we may be screwed regardless:

Some analysts have given up hope for the U.S. maintaining its rating. “We’re at a point that the odds of having a downgrade make it pretty much inevitable,” says Peter Cohan, a financial analyst and head of venture capital firm Peter S. Cohan and Associates. "I see a downgrade as being inevitable. The question is whether markets see that as being significant."

Felix Salmon entertains abolishing the AAA rating altogether:

A downgrade probably wouldn’t cause an immediate selloff in Treasury bonds, not least because there’s no other asset in the world which has nearly the same amount of size and liquidity. But the effect on non-Treasury triple-A debt, including municipal bonds, might well be larger. And the long-term effect is likely to be huge: when looking for a safe haven, investors will henceforth have to stop and think about which one of various options are the least risky. The knee-jerk flight-to-quality trade will be a thing of the past, because nobody will really know what “quality” is any more. Specifically, would triple-A debt be safer than Treasuries, if Treasuries aren’t triple-A?