Richard Koo of Nomura Securities says the ratings agencies, failing to understand this situation, have got their downgrades wrong every time in Japan. Koo has compared ratings agencies to a "doctor who cannot even identify his disease."
Considering the complicity of ratings agencies in the bundling and marketing of trash derivatives, they appear to be corrupt, nevermind incompetent.
The US has an enormous and powerful economy but economic and regulator policy are casting its ability to sustain current activity in doubt much less grow and recover.
Corporations are holding massive amounts of cash, but the run up in Commodities and soon the run up in all real assets will consume these excess fund because government bonds now include principle risk which will be ever more apparent in the next coming months as the futures contracts for commodities that have already run up 30% expire and are priced into the system. 30% interest rates would be necessary to offset this inflation, and that would tank the rest of the US economy, but the only other choice is QE3, and this just increases the ultimate inflation spike and the size of the interest adjustment when someone finally says no. Which couldn't come from the US if they do start QE3 but instead will come from China and others who must accept falling dollar bills for real goods.
Already countries are meeting about how to move off of the Dollar and no one wants this for the moment as much as it would take to deal with it. They would be happy to see us suffer, but in that China would suffer too if the US quit buying their real goods, it is still a balance.
As we shift from buying to taking, that balance will end. Quantitative easing is another long word for theft. It takes from the old who have fixed investments, it takes from all of the savers who are not buying those bonds and it takes goods and services from any foreign country who accepts dollars for these goods rather than their own funds.