Reality Shining Through

BofA is apparently forecasting another downgrade:

The United States will likely suffer the loss of its triple-A credit rating from another major rating agency by the end of this year due to concerns over the deficit, Bank of America Merrill Lynch forecasts.

The trigger would be a likely failure by Congress to agree on a credible long-term plan to cut the U.S. deficit, the bank said in a research note published on Friday.

A second downgrade — either from Moody’s or Fitch — would follow Standard & Poor’s downgrade in August on concerns about the government’s budget deficit and rising debt burden. A second loss of the country’s top credit rating would be an additional blow to the sluggish U.S. economy, Merrill said.

I wholly welcome this development for two reasons.

First, the downgrade might help politicians and voters wake up to the fundamental economic reality America faces. I don’t think the odds of this occurring in a timely manner are very good, but there having a ratings agency speak some semblance of the truth about the federal fiscal situation is certainly going to improve the odds.

Second, there is plenty of entertainment to be found in watching politicians and talking heads explain why a downgrade is just, well, wrong. The nihilist in me watches the world burn. The cynic in me enjoys watching the people who are burning explain how fire is a figment of our imagination. So, if nothing else, the inevitable downgrade at least promises to be entertaining. And, these days, you can’t ask for much more than that.

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