Today’s morning econ email from Paul Donovan at UBS is perfect. Also, too long for twitter so here it is.
“I come to bury US creditworthiness, not to praise it
+ The noble credit rating agency S&P has said there is a one in three chance of a US downgrade within two years. The US can print its own money, and the cost of printing is less than the cost of default. But S&P are intelligent men.
+ The US has no history of coups, repudiating domestic debt. Credit ratings are supposedly an assessment of relative risk and yet there was no comment on France, nor on Germany or the UK. But S&P are intelligent men.
+ Given a choice between abandoning the world’s most liquid and most widely held bond market, or abandoning credit rating agencies as arbiters of portfolios, most investors will likely chose to abandon the agencies. But S&P are intelligent men.
+ The Euro area has seen more significant spread widening, with the US Treasury denying it has suggested a Greek restructuring might be desirable. Markets will not wait for credit rating agencies, but will decide credit worthiness on their own intelligence.”