Yesterday, rating agency Standard & Poor's lowered the United States' long term outlook to "negative" from "stable", citing concerns over the growing deficit. S&P said there was a one in three chance that the United States would lose its top investment grade rating for long and short term debt within two years.
This comes after years of debate in the media and over the longer term impact of the massive deficits and ballooning debt levels, ineffectual and largely meaningless political debate over the ways and means to cut the deficit and a very noticeable rise in global inflation as the Fed continues to debase the world's reserve currency by printing money to fund the politically insatiable demand for unsustainable spending programmes.
S&P is doing no more than acknowledge a reality that the rest of the world has been talking about for years.
America has a spending problem (as do many other countries), not a revenue problem. So far, they have failed to take any meaningful steps to address the problem. The token steps taken so far are largely at the expense of those with limited political power - future taxpayers who will be tasked with the burden of paying for past and present promises made to today's voters - and the very small minority of citizens who pay meaningful amounts of tax. Quite frankly, I feel very sympathetic towards the younger generations who will start life burdened by ridiculous student loans, the higher taxes necessary to pay for the debt and entitlements incurred up by previous generations and the lack of many of the benefits to which their elders have become entitled.
At some point, the perpetual debt system will come under pressure and that pressure will come in the form of either rising interest rates as lenders become increasingly reluctant to invest in a depreciating currency or higher inflation as the country the real value of its current obligations and future commitments continue to be devalued as a matter of policy.
Quite frankly, I'd like to see America's credit rating decline - nothing else has sent the politicians the message that they cannot keep writing empty cheques forever.