RAVI RIKHYE -A LEADING AMERICAN INDIAN STRATEGIC ANALYST ON GRADING DOWN OF US CREDIT RATING

RAVI RIKHYE -A LEADING AMERICAN INDIAN STRATEGIC ANALYST ON GRADING DOWN OF US CREDIT RATING 

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• S & P downgrades US rating to AA+ from AAA This is for two simple reasons. One, world confidence that the US can get legislative approval to keep the government running and interest paid has taken a big hit by the circus we saw in Washington the last month. We are pointing no fingers, but the worthies who didn't want to raise the debt ceiling will cost the US between $70- and $100-billion dollars in additional annual interest, the cost of ensuring US debt will go up, and the effects will likely last for years even if US gets its fiscal house in order. And that's the second reason for the downgrade: anyone who thinks the US will get its fiscal house in order is ingesting overdoses of the Good Stuff. So its the Law of Unexpected Consequences: people wanting fiscal reform and a reduction in spending have cost America more money - a lot more money.

• Earlier one of the other rating services had pushed the US down to AAA negative outlook, which is not as bad as AA+.

• Honest disclosure: Editor was for a default because we are never going to get the mess sorted out with so much debt and he wants this generation to take the hit in terms of a reduction in living standards so that our children can start with a clean slate. Further honest disclosure: should the US default, Editor will be one of tens of millions who will lose their homes and will shift to cardboard boxes and lining up at soup kitchens, because nothing Editor does is needed in an economy under the stress a default would cause. Ancient teachers will be among the first to take hits - indeed, he is in his current situation because ancient teachers have been taking hits since the economy tanked. So Editor is not talking theory from the Ivory Tower with a safe jobs, a house paid off, and a ton and a half of savings: he has everything to lose if the US defaults.