Hacker News Reader

Comment by mdda | Hacker News Reader

No - AAA was always meant to be the best of the best.

Interestingly, there's now the question of whether the US debt should be rated AAA : Is there more than a 1-in-100 chance that the two sides can't get to some compromise (or, more likely, agree on how to kludge things) by September?

AAA is meant to lead to default at a 1-in-10000 per annum rate (it's a standardized measure). So, by that argument, USA downgrade should have already occurred.

And, since companies cannot be rated higher than the countries that they're in, that would lead to the immediate downgrade of Microsoft, etc...

View on HN

> And, since companies cannot be rated higher than the countries that they're in

There's no such rule. In fact, Japanese companies have been rated higher than Japanese sovereign debt.

http://www.bloomberg.com/news/2011-01-27/toyota-canon-rating...

Companies cannot be rated higher than the country they are in? I don't understand why that would make sense, especially in a case like the US - congress being unable to extend the debt ceiling shouldn't have that significant of an impact on Microsoft, a globally diversified company, being able to pay back it's debts...but then, the financial world is full of fun, arbitrary rules.

Microsoft's debt would be issued in dollars. If the US fails to back the dollar, Microsoft's debt is also worthless, because it's also dollars. So it would make no sense for MS bonds to be rated higher than the US.

The rating only covers default risk, not currency risk.

Wow I never looked at it like that before. Of course if the currency collapses the companies operating in it are f'd. We need to resolve the housing foreclosure mess and stop accruing debt.

There are a lot of messes that need to be resolved, but notice that mortgages barely figure in the chart, the housing foreclosure mess is 'merely' shit rolling downhill in this picture

Really downvoters. You think we need more debt and to ignore the the housing crisis? Really?

I don't understand the jump in logic you are making from "the US government is at risk of defaulting on it's debt" to "the US dollar is at risk of failing as a currency". Can you explain this?

You seem to be jumping from one conclusion to another which much reasoning to link them, and then drawing another conclusion from that.

I'm afraid there is no jump. If the US defaults interest rates will rise but they can't as the market is dependant on cheap money. That why interest rates have been at 0% for a long as long as I can remember and it is also why QE1 and QE2 were done. To increase the supply of cheap money. If the US defaults the dollar will crash. Look at what happened to Argentina in the late 90s. No I don't think the chances are very significant now but the conditions are certainly there for it to happen. I'm sure a whole paper could be written on this but I am only trying explain where I am coming from.

Reply on news.ycombinator.com