One Economic Analysis Following the Downgrade

Stuart Thomson,chief economist at Ignis Asset Management, posted an analysis of the economic environment following S&P's downgrade.  The highlights:

1. "We do not expect any material selling of Treasuries as a result of this action. Indeed, the economic consequences of S&P’s puritanical austerity demands are likely to be bullish for Treasuries because the pressure for greater fiscal austerity is likely to be bearish for nominal growth" 
2. "This suggests that growth will be 1.75%-2.0% over the next few years. Failure to extend these temporary tax proposals could push growth towards 1%."
3. "The Federal Reserve and Ben Bernanke in particular have absorbed the lessons of the past and will pursue further quantitative easing to prevent recession and deflation."
4. "(T)he resulting growth will resemble Japan’s lost decade rather than the Great Depression."

I highly recommend reading the entire note.