Don't blame Standard & Poor's for the meltdown, the picture is more complicated than that.
First, there's the prospect of a double dip recession and then there's Europe. To attribute it all to the downgrade is to overlook the fact that US Treasuries have soared. Think about it, if people actually thought the US was about to default, they wouldn't be buying Treasuries, would they? There is something else going on.
It's a point taken up by James Surowiecki in the New Yorker
"Given the internal dynamics of the stock market nowadays-when so much trading is algorithmic rather than fundamental-even small changes in investors' risk preferences can translate into big price moves,'' Surowiecki says. "On top of this, there are problems out there that are actually real, like the question of whether the European Central Bank will be stalwart enough in its buying of Italian and Spanish debt, and how Washington, and the Federal Reserve, will deal with the stalling U.S. economy (a subject I wrote about in my column this week). It's those issues, I suspect, that are really preying on investors' minds-rather than the judgment of a few guys at S. & P."
In other words, there are bigger problems out there than S&P. And to blame S&P for this meltdown is missing the point.
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