I am saying, any downgrade of U.S. Treasuries should have had no other criterion than the risk of inflation, as that is the only risk U.S. Treasuries represent to the holder. However S&P down rated Treasuries, they say, because of Congress's annual threat to not approve the budget -- or in Congress's lingo, not raise the "debt" ceiling. Of course, this is ridiculous and the U.S. will never default on Treasuries. Apparently S&P and Moody don't have a clue how to rate sovereign bonds issued in the Sovereigns own currency. They still treat these as if they represented real debt and therefore could be defaulted on. They should stick to rating real debt which would be corporate bonds or bonds issued by a sovereign but denominated in another nations currency. The misunderstanding of the true nature of sovereign bonds denominated in the issuers own currency runs deep and pervades world bond markets. For example, if you currently own Russian Bonds denominated in Rubles there is zero risk of Russia defaulting on them, unless they just don't like you!. All the risk you bear has to do with the future buying power of the Ruble relative to other sovereign currencies. On the other hand Russia has also borrowed in dollars. Those bonds do bear a risk of default. Instead of being paid in dollars, you could be paid in Rubles at some trumped up artificial exchange rate relative to the dollar. That would be a default.
