United States Debt Downgraded by S&P Today

The ability of the United States to pay its debt is being questioned for the first time in 235 years by Standard & Poor's, a credit-rating agency that downgraded US debt from AAA to AA plus.

I believe that the rating and downgrade of US debt by S&P is largely ceremonial in nature since the United States is bound by the Full Faith & Credit Clause of the Constitution to honor its debt obligations without question. Whether publicly rating and downgrading the debt of a sovereign that can legally print legal tender to pay its debts is lawful in the United States remains to be seen. While opinions may differ on that issue, it is painfully apparent that such an act violates common sense since the sovereign can always print money to pay its bills, making its ability to honor its debt a moot point.

For this reason, I doubt that the downgrading of US debt by S&P will have much effect. Furthermore, what is the alternative when a business or another sovereign is looking for a currency that is has liquidity in the world markets and is issued by a country that is politically stable, a leader in business, higher education, medicine, defense and technology and has no history of default?

S&P ought to limit its credit ratings to the private sector and sovereigns that do not have the legal authority to print money.