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Indeed, as we’ve been harping here, the only reason the U.S. has been able to fund its FY 2011 deficit with relative ease is because the Federal Reserve is purchasing 60% of it, half of the FY 2011 deficit through direct monetization via QE-2—in other words, money-printing.
Compare the U.S. Treasury bond’s Triple-A rating, and compare it to the Japan downgrade: The fact that Japan really doesn’t have any sort of idea how to cut its deficit (which is the rationale for
But the U.S.? Chulo, please . . . Treasury depends on Fed monetization to cover the deficit—need anything else be said?
Bottom line: Ignore the ratings agencies, they are irrelevant.
Update: A mental glitch was responsible for the reference to Moody’s, rather than Standard & Poor’s. Apologies and self-flagellations, as required.