US trying to put out a fire with gasoline

'Who will be the next?" was the common refrain as other members of the US' triple A club, such as Fannie Mae, Freddie Mac and the top five insurance conglomerates, were unavoidably downgraded following the first downgrading of the US Triple A rating since 1917.

However, some argue that the downgrading was no big deal and the ensuing market chaos was only a "knee-jerk response", as the hegemony of the US dollar means the US can reduce its debt burden by depreciation, a further round of quantitative easing (QE3), and by stoking fears to make US assets more attractive. Yields on 10-year US government debt had actually fallen recently, and investors are unlikely to rush out of US debt, the dollar, or even US equities en masse.

But even the hegemony of the dollar cannot guarantee the US will escape the escalation and deterioration of its debt problem.