International banks and investment companies do not rely on rating agencies to form credit opinions. Savvy investors and lenders perform their own country risk analysis.

Rating agencies’ business model is flawed. Rating agencies are often contradictory with one another on the rating of the same entity. They are always steps behind the events. S&P reaffirmed its AAA rating for Lehman Brothers Holdings Inc.’s financial products unit on Sept. 12, 2008, three days before the bank failed, Bloomberg reports. Rating agencies are paid by the entities they rate—a conflict of interest. When the rating is unsolicited the agency is denied access to the management of the rated entity; thus, distorting the quality of the rating. Nobel Laureate Paul Krugman said in a New York Times column. “These are the last people whose judgment we should trust.”

The S&P misjudgement on U.S. rating is consistent with other misjudgements committed by rating agencies in recent years. The exaggerated AAA ratings hastily showered on mortgage-backed securities (paid for by the banks) precipitated the real estate market meltdown and the severe recession that continue to afflict the world today. In April 2011, a Senate panel said that the rating companies engaged in a “race to the bottom” to assign top grades on mortgage-backed securities in order to win fees from banks, said Bloomberg.

Magnifying rating agencies harm is the financial media propagandists who together with the speculators among their guest “experts” posture self-serving pontifications to promote their own political agendas and to “talk” the markets into directions profitable to their own gambles.

While bond rates might rise slightly immediately, financial markets would realize quickly that America remains the most viable and reliable borrower around. The Chinese, Japanese, and OPEC surplus members will not abandon U.S. government bonds any time soon. They have no credible alternative. Not even Euro denominated bonds of AAA rated EU countries are in vogue any more. The Euro, which only two years ago was the darling of investors and a strong candidate to share with U.S. dollar its reserve currency status has recently been under a cloud of uncertainty, even fighting for survival, as the Euro zone economic house is being put in order in Greece, Ireland, Portugal, Italy, and Spain, among others. As for those AAA ratings bestowed by S&P upon the likes of, among others, the Isle of Man, Guernsey, and Liechtenstein (85,000, 65,000, and 35,000 inhabitants; respectively), well!

For five decades, many in Europe and Asia have been wishing to replace the U.S. dollar as reserve currency—the Japanese yen, the Deutsche Mark, the British Pound, and the IMF’s composite unit of account, the SDR. They all came to naught.

There is no credible alternative on the horizon to the U.S. dollar as a reserve currency, yet.  No country possesses sufficient depth in money supply to compete with the U.S. dollar as a measure of value and medium of exchange in the rapidly growing world trade in the age of globalization and to deal with the challenges resulting from losing control over that proportion of the national currency traded outside the country's national borders. Indeed, no country produces even one-half of America’s almost 15 trillion in nominal GDP, nor the wealth of its economic resources and industry, let alone America’s great universities and laboratories, which received 47% of the Nobel Prize awards in the sciences, medicine, and economics.

Moody’s and Fitch did not join the S&P verdict. They affirmed on August 2, 2011 America’s AAA rating.

S&P used two arguments for its action. The first is its objection to the bitter debate in the House of Representatives over the raising of the debt limit. Such a reaction is disingenuous. S&P must be aware that unless the same political party controls the House, the Senate, and the White House gridlock and compromise are a way of life in Washington D.C. This time, the Tea Party and America’s extreme right, who control the House, chose intransigence over compromise in order to embarrass president Obama in an election year. They turned raising the debt limit, a non-event historically, into a contentious issue.

The U.S. Treasury advised S&P of some $2 trillion error in the agency’s calculation. That S&P admitted the error and changed its economic assumptions but refused to change its opinion to downgrade smells of political mischief. Republican presidential hopefuls and others already seized upon the S&P action to attack Mr. Obama.