The Flinchum File

Thoughtful Economic Analysis and Existential Opinions
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Apologies to Mr. Spock

Do you remember Mr. Spock, the Vulcan on the original Star Trek TV series long ago?  He prided himself on being entirely rational and devoid of human emotion.  Being an investment advisor, I’ve always tried to emulate that thought process.  However, his dirty little secret is that he sometimes felt those emotions, and so do I.

Tonight, Standard & Poor’s downgraded the credit rating of the United States of America to only AA+.  (Yes, this is one of those rating agencies that rated sub-prime mortgage backed securities as AAA.)  Hearing that, it was like the first time you heard one of your daughter’s ex-boyfriends was bad-mouthing her.  It hurts!

Putting on my best Mr. Spock face, the market will not over-react to this, as it is not a surprise.  Besides, the two other ratings agencies, i.e., Moody’s and Fitch, have not downgraded us.  Normally, this would increase our cost of borrowing or the rate of interest that we taxpayers pay on Treasury debt.  Because these are not normal times, especially in Europe, our bonds will pay lower interest as scared investors hide in our Treasury debt, at least until the European storm blows over.  When things get normal, the interest expense paid by taxpayers will increase.

Yeah, yeah, we will survive.  Since the market was expecting it, this is really not a big deal.  Besides, this was not a downgrade of our long-term credit, just short-term.
Still, putting on my best father face, I just wish I could get my fingers around the neck of that ex-boyfriend!!
I’m sorry, Mr. Spock . . .