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Comment by derrickpetzold | Hacker News Reader

jellicle is correct the ratings are complete bs. If AAA actually meant something the US would have been downgraded years ago. AAA means there is no chance of default no whatever so ever. It should only be reserved for countries with little or ideally no debt. The fact that our politicians and media are openly talking about default means that AAA does apply to the US but it does. So it means nothing.

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The (non-BS) default risk of the US is very close to nil. Hence the AAA is deserved. But the currency risk and the interest rate risk is very high. Here's the pair trade if you want it:

http://finance.yahoo.com/q/bc?s=JNK&t=2y&l=on&z=...

...notice that the 20 year treasury is more volatile than junk bonds.

You obviously don't understand the concept of duration. You are comparing 5-10yr debt to 20-30yr debt.

More apt comparison would be intermediate treasuries, much different picture (time frame also questionable for a pure comparison):

http://finance.yahoo.com/q/bc?s=JNK&t=2y&l=on&z=...

You can see some better numbers here. Of course, when I say "interest rate risk", that function involves duration.

http://etfdb.com/etf/JNK/fundamentals/ http://etfdb.com/etf/IEF/fundamentals/

AAA doesn't mean no chance whatsoever and never has, it means minimal credit risk

http://www.moodys.com/sites/products/AboutMoodysRatingsAttac...

Well there are 7 levels of A rating. The US certainly doesn't deserve to the top most tier since there is active discussion of default. No I don't think it actually would but what is the point of these ratings if they are being used like this?

The is no legitimate discussion of the US defaulting, just political demagoguery. Greece, on the other hand...

If a country has no debt, what security is being rated AAA?

Sorry you are correct the debt is rated not the country.

OK, let's look at structural deficit, GDP growth, and Net International Investment Position.

NIIP is interesting. Despite the US's huge debt, they have a reasonable NIIP of about -25% (I think). So the money is mostly there. It's mostly in private hands, but as long as the private sector is OK, the government will keep collecting taxes.

The obvious problems with the US are its health system (more public funding than countries with free health, but terrible value for money), its military deployments (the military can be an OK if they use it to drive high-tech growth, but actually deploying it very expensive), its prison system (they tend to lock criminals up for a little too long, and they have way too much crime for other reasons).

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