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AAA Ratings or Not, US Bonds Are Toast

For years it was only within the sphere of conspiracy theory and contrarian news. But a downgrade of US debt is becoming more likely as budgetary and monetary problems come to a head.

The debt ceiling debate in Congress is really nothing more than a distraction. The government will not shut down simply because just about everyone knows Congress will eventually raise the ceiling to absorb even more debt. A week or two delay is no big deal. Very few of our elected officials are prepared to take the necessary steps and the subsequent immediate pain that would follow an outright refusal to increase our debt borrowing capabilities.

But what the current budget and spending debate highlights is something worse than just the possibility of a temporary government shutdown. Tim Geithner’s letter to Congress regarding the debt ceiling in January of 2011 made it clear that 'We’re Literally On the Brink of Catastrophic Collapse'. While a temporary government shutdown may delay some services and entitlement payments, paychecks for soldiers and processing of IRS taxes, it is nothing compared to what would happen if the US government were to lose its AAA bond status.

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AAA Ratings or Not, US Bonds Are Toast