S&P Cuts Italy's Sovereign-Debt Rating

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Read the rest here: http://online.wsj.com/article/SB10001424053111904106704576581301721363640.html

I bring this up because I find it funny that some would be critical of S&P's downgrades of sovereign debt since they gave AAA to CDSes containing many subprime mortgages. Reporters spin it this way: "Hah! These are the guys who gave AAA to subprime! They have no credibility!"

They totally miss the point. If they were willing to give AAA to trash, then what's a downgrade from AAA (a.k.a. "trash") mean?

Basically, you get paid in dollars when you hold t-bills. If you're getting $100 back with 2% interest, you've lost to inflation. You're just funneling wealth into the gov't coffers and getting nothing in return. This is why it's no AAA any longer... at least according to one trading firm that's slightly sensible.