From Zero Hedge:
While the impact on Treasuries as a result of the downgrade may be limited (after all the other side of the Atlantic is about as ugly as the US, so where could $8 trillion in marketable USTs practically go… at least for now), the same may not be said about the far smaller, $2.9 trillion municipal market, which is about to see a blanket downgrade tomorrow as S&P warned on Friday night, and of which Matt Fabian of Municipal Market Advisors earlier said that “There will be hundreds and hundreds of municipal downgrades, which will not do well to bolster investor confidence.” The scary bit: “Treasuries may be able to shake off a real impact from the downgrade. Munis I’m less sure about…
This could be devastating to the already stressed budgets of municipalities – many of them, burdened under bloated pension budgets and other foolhardy spending, are just an ace away from bankruptcy, as it is. Put a bit more pressure on them and a lot could fail. And even if they manage to scrape through, this will mean less money for police, fire and schools…and likely further rounds of government worker layoffs (which, in a macro sense, aren’t bad, but are plain and simple lousy for the people losing their jobs).
Learn the lesson – debt is poison. No government should ever carry any of it – certainly not for anything less important than fighting a World War. To mortgage the future under the best of circumstances is foolish..to mortgage it in order to keep up a bloated, wasteful government entity is criminal. The change must come, and we might as well get over the worst of it right away…slash budgets until no more bonds need to be sold, and then rebuild from there.