Fed to the Rescue?
The solvency of the U.S. government is not in any serious doubt. The imminent S&P downgrade of Treasury debt is not about economics; it is about politics. It is, at root, about the public display of political dysfunction in Congress.
One symptom of this dysfunction is the current brinkmanship over the debt ceiling. Since there is no real solvency problem, the point seems to be to provoke a liquidity crisis, and to use that crisis to force the other guy to back down.
On this point, impressively, bi-partisan agreement is the rule. Read more