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 Emmy-nominated, Business Analyst for CBS News. She covers the economy, markets, investing and anything else with a dollar sign on TV, radio (including her nationally syndicated radio show), the web and her blog, "Jill on Money." Prior to her second career at CBS, Jill spent 14 years as the co-owner and Chief Investment Officer for an independent investment advisory firm. She began her career as a self-employed options trader on the Commodities Exchange of New York, following her graduation from Brown University.