When Standard and Poor’s downgraded nine European countries last Friday, they said plainly that European leaders were blinding themselves to the full crisis, ignoring the trade imbalances between core and peripheral Euro nations. But Germany’s Merkel doubled down on austerity, which has created a depression in Greece, with huge risks of default.

Europe has lived in an almost perpetual state of collapse lately, with promising deals followed by despair. This was one of the despair days.

One of the standard opinions from many economists, especially those on the right, was that the US spending/debt load was unsustainable and would surely spark massive inflation. After the downgrade of US debt by Standard and Poor’s after the debt limit deal, debt was seen as toxic. America just had to deal with its debt problem or the bond market would deal with it for them. This dog simply has not barked.

A couple days ago, Yves Smith speculated that Standard and Poor’s broke SEC regulations by leaking word of its imminent downgrade of US debt before it occurred. Charlie Gasparino backed her up a day later. And now, the Securities and Exchange Commission is reportedly investigating whether S&P leaked.

If the rating agency’s entire argument was that the political system showed itself to be “less stable, less effective, and less predictable” during the debt limit debate, and that this failure of policymaking and institutional capability increases the chances of default, I don’t have much to argue about that. But, there’s a policy response for that. S&P could do exactly what Moody’s did and call for the debt limit to be extinguished, on the grounds that the legislative branch shouldn’t get to vote twice on funding, once when they appropriate it and another time when they decide whether or not the bill should be paid. If they really wanted to exert some influence on behalf of bondholders, they could have said that they would downgrade US debt further if the debt limit isn’t abolished within 90 days. Since the brinksmanship over the debt limit constitutes the biggest – perhaps the only – threat to paying off US sovereign debt, then the appropriate action for entities judging creditworthiness is to ask that the country in question eliminate the arcane and also dangerous practice.

But that’s not S&P’s only rationale.

To the extent that there’s any fallout from the political gridlock in Washington, it’s that the country cannot execute the simple, fundamental steps to improve economic performance. Contractionary fiscal policy gets combined with an anti-expansionary debt limit deal to magnify the effects of the end of the stimulus.