Best Q&A I've Seen on the S&P Downgrade

This is from Floyd Norris at the NY Times Economix blog:

Q.

So the U.S. debt is up partly because S.&P. was incompetent before the financial crisis. Is there any particular reason to assume they know what they are doing now?

A.

Next question.


I don't really have much to add that's relevant.  On something of a tangent, I have seen one or two comparisons with Hapsburg Spain's defaults.  There is some validity to this, the big reason behind the Spanish defaults is that the Spanish kings couldn't find a reliable method of taxation, powerful corporate (not modern legal corporations but rather things like guilds, magnates, and the church) interests were able to successfully block the king from obtaining revenues from the greater parts of his lands.  It is also notable, this turned out poorly for those powerful interests in the long run.  Those wealthy, untaxed elites didn't exactly end up as the vanguards for capitalism and suffered greatly when the broader society began to decay.  Unlike economics, in politics, everyone acting solely in their own self interest tends to make everyone much, much poorer.  They of course never realize this until it's too late, despite the many historical lessons this lesson can be drawn from.

Hey, but this time it's different.  Because, we're the elites, and not those other fools.

Of course, this is what those other fools said too.