The bad news is the world has concluded that we’re not the grown-ups they thought we were.
A credit downgrade means U.S. Treasuries will not be considered risk-free assets anymore. Instead investors will find German bonds or Singaporean bonds more attractive.
The general worry about investing in U.S. Treasuries doesn’t mean we’re at risk of a double-dip recession. But, this could be the end of American exceptionalism.
The only way to bounce back is for lawmakers to go back and find another $2 trillion to $4 trillion in spending cuts, like originally suggested.We’ve now botched three chances at fixing our long-run fiscal problems.