S&P Downgrade: Does it Matter?

Last Updated Aug 6, 2011 8:46 AM EDT

Standard & Poor's downgraded US debt from AAA to AA+ after the US markets closed last night. You remember S&P--the company that along with Moody's and Fitch, rated hundreds of billions of dollars worth of mortgage backed securities that were filled with toxic sub-prime loans as investment grade. You know, the companies that were paid scads of money for these rotten ratings by the investment banks that were selling the "investment grade" assets?

Maybe when the Asian markets tomorrow night, there will be another round of big selling, but don't blame the S&P downgrade. Besides hinting at the downgrade for days and weeks, I can't help but think the move is largely irrelevant.

Last week, investors told the world just how much they still believe in the good ol' US of A. When chaos and panic were spreading across global markets, investors piled into US government bonds, clamoring to lend the government money for ten years at an interest rate of less than 2.5 percent!

S&P might have downgraded US debt, but investors still rate Uncle Sam with a sterling Triple-A, and in the end, isn't that more important than what a ratings agency says?
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    Jill Schlesinger, CFP®, is the Editor-at-Large for CBS MoneyWatch. She covers the economy, markets, investing or anything else with a dollar sign. Prior to the launch of MoneyWatch in 2009, Jill was the chief investment officer for an independent investment advisory firm. In her infancy, she was an options trader on the Commodities Exchange of New York.

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