Let's face it. There was never any real danger of default had the powers that be in Washington, DC not agreed on a deal to raise the debt ceiling by the self-imposed Tuesday evening deadline. It was merely a chanting point used by President Obama and his fellow Democrats in an attempt to stem the tide of a potential GOP onslaught in 2012.
In the end, the President got his debt ceiling hike but thankfully was thwarted in his attempts to raise taxes. From the GOP perspective, this deal can't be all bad when you consider that the New York Times holy trinity of Krugman, Dowd and Friedman are pitching a fit over it. A serendipity, if nothing else.
The next phase of this drama concerns whether or not the United States will be able to maintain standing as a top-notch borrower.
Many economists believe that America could soon lose its triple-A credit rating, despite a deal being agreed. Standard & Poor's, the rating agency, recently said that a credible fiscal plan would need to include $4tn of deficit-reduction measures.
"Avoiding the worst case scenario of a default on US Treasury obligations will not prevent a downgrade of the triple-A sovereign rating," said Kevin Daly, emerging market debt portfolio manager at Aberdeen Asset Management. "So it's time for us all to figure out just what it means when the US gets downgraded."
Stuart Gulliver, chief executive of HSBC, said the progress made over the US debt ceiling was "very welcome", but also warned that America could have its credit rating cut.
Exit question: Shouldn't S&P themselves be under a tremendous amount of scrutiny, given that they gave such good ratings to many mortgage-backed securities that went bust?