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Paul Krugman reacts to the S&P downgrade of the United States

The Nobel-prize-winning economist castigates the credit rating agency on his blog.

By Staff Blogger

Writing on his New York Times blog last last night, Nobel laureate, Obama critic, Princeton economist and card-carrying Keynesian Paul Krugman reacted angrily to the controversial decision by Standard and Poor’s (S&P) to downgrade the United States’ top-notch triple-A credit rating for the first time in history.

Professor Krugman wrote:

On one hand, there is a case to be made that the madness of the right has made America a fundamentally unsound nation. And yes, it is the madness of the right: if not for the extremism of anti-tax Republicans, we would have no trouble reaching an agreement that would ensure long-run solvency.

On the other hand, it’s hard to think of anyone less qualified to pass judgment on America than the rating agencies. The people who rated subprime-backed securities are now declaring that they are the judges of fiscal policy? Really?

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Just to make it perfect, it turns out that S&P got the math wrong by $2 trillion, and after much discussion conceded the point — then went ahead with the downgrade.

. . . In short, S&P is just making stuff up — and after the mortgage debacle, they really don’t have that right.

You can read the full blogpost here.