Monday, April 18, 2011

Thowing down the gauntlet

The U.S. has been downgraded by a U.S. company with as many political ties and revolving doors as just about any company extant. So, since nothing really fundamental has occurred in the past month regarding the ability of the United States, a SOVEREIGN CURRENCY ISSUER, to simply debit and credit Treasury accounts at the Fed, The Recapitulator thinks some blatant manipulation is going on.

You see dear readers, sometimes "news" is simply fabricated for the benefit of certain market participants. This "news" of a "negative watch" by S&P manufactures a VALUABLE piece of information, one in which if it was LEAKED prior to release, would be very profitable to various players in the game. The effect cascades as more players are convinced that this information somehow changes reality itself. Its a wonderful example of how the silly assumptions raised by academics regarding the "efficiency" of markets are nothing more than hand-waiving normative musings. So, qui bono?

NEW YORK (TheStreet) -- Standard & Poor's has downgraded its long-term ratings outlook on U.S. sovereign debt, citing worries about the country's mounting budget deficits. While S&P acknowledges that the U.S. has been effective in its monetary policies, the consistent global preference for dollar over other currencies and the flexibility and diversification of the domestic economy, it proceeds with the downgrade to negative from stable because of the country's "very large" budget deficits relative to AAA peers and uncertainty over how they will be resolved.

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