That AA+ rating

So one of the big credit rating agencies, Standard & Poor's, has downgraded the United States' rating from AAA to AA+ — basically, from so called "prime" debt to "high grade" debt. Still a long way from junk then.

Good, even so. Sovereign states, especially big ones that feel utterly omnipotent within their own territory, are prone to a kind of ego inflation in their governmental elites that lead them to believe that they can make just about anything happen so long as they can get agreement from "stakeholder" parties. They are so used to making, and on occasion bending, the legal laws in other words, that they fall into the trap of thinking that the laws of nature can be chivvied in the same way.

Big mistake. I see that the administration still hasn't really learned this lesson: the article linked to above notes that "unnamed officials in Washington had told US media that S&P's analysis of the American economic situation was deeply flawed". Shoot the messenger then!

In part of course, the agencies are simply making up for their failings pre-2008, when their routine granting of prime and high grade ratings to what turned out to be toxic and unrecoverable debt made them look like complete patsies — and complicit patsies at that, given that companies pay them to rate them. In an echo of "quis custodiet", who will believe the agencies' credit ratings, if they have no credibility themselves? So it's only natural that, now they are finally and completely awake, they are rushing around and barking like mad, in an effort to convince their subscribers that they are worth the money.

For all the briefing and spinning in Washington, and in chancelleries around the world in what are pleased to call themselves the "advanced" economies, you have to remember one thing: these countries are all running primary deficits; they are all still getting further into debt. For all the sound and fury in Washington last week, the nub of the agreement they reached was that they would allow themselves to take on extra debt now, while cutting back a little bit on the expenditure in two years' time. That's all you need to know to figure out that in a national emergency, US politicians' time horizon shrank to just under two years.

Imagine a rich man who, when told by his bankers that his extravagant spending has outpaced even his magnificent income by some 20% per annum, decides that he can, with great difficulty and with a lot of noble self sacrifice and tears, perhaps cut that 20% deficit to 18%, and really, the bankers should be grateful that he could manage even that. There were many such men in 18th century Europe, noblemen who knew how to spend but not how to save, and without fail they left their families ruined and their estates in the hands of other, more sensible individuals.

Indeed, it all reminds me rather horribly of one of my favourite bits of Jane Austen:

But now, another occupation and solicitude of mind was beginning to be added to these. Her father was growing distressed for money. She knew, that when he now took up the Baronetage, it was to drive the heavy bills of his tradespeople, and the unwelcome hints of Mr Shepherd, his agent, from his thoughts. The Kellynch property was good, but not equal to Sir Walter's apprehension of the state required in its possessor. While Lady Elliot lived, there had been method, moderation, and economy, which had just kept him within his income; but with her had died all such right-mindedness, and from that period he had been constantly exceeding it. It had not been possible for him to spend less; he had done nothing but what Sir Walter Elliot was imperiously called on to do; but blameless as he was, he was not only growing dreadfully in debt, but was hearing of it so often, that it became vain to attempt concealing it longer, even partially, from his daughter. He had given her some hints of it the last spring in town; he had gone so far even as to say, "Can we retrench? Does it occur to you that there is any one article in which we can retrench?" and Elizabeth, to do her justice, had, in the first ardour of female alarm, set seriously to think what could be done, and had finally proposed these two branches of economy, to cut off some unnecessary charities, and to refrain from new furnishing the drawing-room; to which expedients she afterwards added the happy thought of their taking no present down to Anne, as had been the usual yearly custom. But these measures, however good in themselves, were insufficient for the real extent of the evil, the whole of which Sir Walter found himself obliged to confess to her soon afterwards. Elizabeth had nothing to propose of deeper efficacy. She felt herself ill-used and unfortunate, as did her father; and they were neither of them able to devise any means of lessening their expenses without compromising their dignity, or relinquishing their comforts in a way not to be borne.