Geithner: S&P Acted Stupidly

I'm paraphrasing, of course, though just barely.

The credit rating agency Standard & Poor's showed "terrible judgment" in lowering the U.S. government's credit rating, Treasury Secretary Timothy Geithner said Sunday... "They've handled themselves very poorly. And they've shown a stunning lack of knowledge about the basic U.S. fiscal budget math," Geithner said in his first public comments about the credit rating decision.



...Late Friday, S&P announced it was lowering its rating for U.S. debt one notch from AAA to AA+... The other two major credit rating agencies, Moody's Investor service and Fitch Ratings, have not lowered their AAA ratings, although they have warned of a possible downgrade if more is not done to deal with soaring federal deficits.



...S&P had been warning for months of a possible downgrade and said that a credible plan would need to achieve $4 trillion in deficit reduction. The plan that Congress passed last week seeks to achieve between $2.1 trillion and $2.4 trillion in deficit cuts.



...He said he had "absolutely no concern" that China, the largest foreign holder of U.S. government debt, would stop buying that debt...

While it is true that China has limited options for diversifying its investments, the alarm claxons truly are sounding as the PRC's leadership prepares for a new sheriff in the global economy.

"The U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone..." -- China's state-owned Xinhua News Agency... Beijing may well increase its reserves held in Yen, as well as in gold. And it will no doubt continue to increase its investment in hard assets...

As for our beloved Commander-in-Chief, who hasn't been heard from for the last 48 hours or so?



President Obama is slated to speak to the country about the ongoing crisis at 1pm Eastern Time today. Expect to hear the blame for the sovereign debt crisis apportioned to S&P, the Tea Party, corporate jet owners, hedge fund managers, oil companies, health insurers, millionaires and billionaires, and the rest of the usual suspects. Though not necessarily in that exact order.



As Steven Hayward observes, "You know who should watch Obama's statement today closely? Standard & Poor's legal team."