American won’t run out of money unless it runs out of paper and green ink.

Yet S&P still give Coke and Microsoft AAA ratings? Last I checked, Coke and Microsoft can’t print their own dollars.

And, more importantly, why is an organization with no public accountability so influential in deciding economic decisions that affect the world?

Because, in this case, an organization with public accountability would be subject to political pressures. Theoretically, they are accountable to their reputation. That reputation has been deeply weakened by their recent ratings, but many things remained tied to that rating in many companies. The U.S. government generally bases its economic decisions off of the CBO estimates rather than those from Moody’s and S&P, but many companies, including trust funds, use S&P’s assessments for now.

You must remember that economic systems consist of a vast number of independent free actors, regardless of how much regulation you put on those actors. They will ALWAYS be influenced by things outside of the control of the government.

http://www.msnbc.msn.com/id/21134540/vp/44052331#44050320

Notice Greenspan pointing out the EU going up in flames is going to not exactly be benificial to our exporting (and you know, maybe notice what he say’s about just printing it away, because us investor types realise such could happen, and want it priced in…)

http://www.zerohedge.com/news/china-isnt-exactly-floating-yuan

“Earlier we speculated that the one thing that could throw this whole fiasco into a complete tailspin is for China to float the renminbi, which would catch an already frazzled America unawares, as China submits a formal bid for its currency to become the de facto global reserve. Well, that didn’t quite happen. However, at a massive 0.23% change in the fixed overnight rate, a move that very much hurts China, it is about as symbolic of an intraday change as can be. The PBoC set the Monday USDCNY fixing at a record high of 6.4305, up from 6.4451. While it is unknown whether this near record rate of FX change will be sustained, China just sent a very clear message to the US, following the previously noted opeds in both Xinhua and FT, in which various Chinese individuals blasted the current situation America finds itself in. The only question now is whether China will proceed with a very demonstrative dump of US bonds tomorrow to reinforce the purely political statement it just made in FX.”

You really need to look outside our boundries…

The bursting of the housing/debt bubbles is another reason for their concern – although it was not entirely Wall Street’s fault. They’re trying to do a better job now.

I think Gaythia hit it the head regarding their track record.

I don’t think the inability to ever pay what’s on loan back has anything to do with it… The insurence spreads have been pricing it *way* less than AAA for a while now… As I said in a previous statement, the monaotists and Keysians never understand why the bond holders think they ought to get fully paid…

http://www.zerohedge.com/news/qbamcos-take-us-downgrade:

“It is still not too late to submit one’s thoughts of what the US downgrade means for various asset classes and for the economy, and world, in general. Here is one of the few worth reading, courtesy of QBAMCO’s Paul Brodsky and Lee Quaintance. Their conclusion: “the downgrade is effectively a currency downgrade, which seems very reasonable, overdue and, in real terms, insufficient. We would argue that in real terms, US Treasury obligations are non investment-grade. We think Treasury obligations today and always will be money-good, but principal and interest will be repaid with bad money.”"

So yeah, I think they wanted to downgrade the AAA, and the numbers they provided were just support for it – so if the numbers weren’t exactly right it didn’t really matter to them. This is slightly different from your motivated reasoning if they never really attached weight to those figures in their reasoning – though it sure looks bad when they turn out to be wrong.

On the other hand, are they wrong to downgrade? I don’t think so. The other ratings firms are the ones artificially keeping the rating at AAA because that makes everyone happy. Cart before the horse. This may have something to do with S&P’s embarrassment of rating all those subprime bundles as AAA.