Not to be outdone by Moody’s in the mindless pursuit of mindlessness, Standard & Poor’s announced yesterday that “there is a 50 percent chance it will [downgrade the U.S. credit rating] within three months, if Washington fails to come to an agreement over the nation’s debt.”
As so we have this wholly accurate summary of the rigorous thinking of the rating agencies:
Any of my undergraduate students receiving a grade of C or higher — every one of them — would do better than this. The press, of course, is equally silly. The Washington Post story actually argues that a credit downgrade under these circumstances will increase the interest rates that the U.S. government would have to pay on its debt, as if the world capital market cares one whit about the opinions of the rating agencies, which in any event always reflect old news.
More generally: The sudden eruption of news about the views of the rating agencies really is quite amusing. I once was walking my dog in a park when a deep thinker sitting on a bench informed me that the earth is both flat and destined to end within a day. As my time is not worthless, I ignored him. In precisely what sense are the blatherings of the rating agencies of greater interest? Someone? Anyone?
— Benjamin Zycher is a senior fellow at the Pacific Research Institute and a visiting scholar at the American Enterprise Institute.