I think it makes perfect sense. We have a debtor who contemplates for weeks whether to default on its obligations. Why on earth would you give such a debtor an AAA (~="absolutely trustworthy", _not_ "as trustworthy as it gets") rating?

I don't think these ratings are intended to still hold true in a global meltdown type scenario.

Your point does show though how ridiculous the current situation is. A country that is up to its eyeballs in debt really should not be the measuring stick.

"I don't think these ratings are intended to still hold true in a global meltdown type scenario."

That was Vlad's point. The US debt is, for the time being, 'too big to fail' in the sense that things like oil is priced in dollars. So almost by definition, the US debt is AAA and everything else is the same or less risky than that. (Talking strictly about soverign debt here, corporate debt is a different kettle of fish)

"Your point does show though how ridiculous the current situation is. A country that is up to its eyeballs in debt really should not be the measuring stick."

This seems to be a common misperception, which is where our 'eyeballs' are, relative to the amount of debt we are carrying as a country. Compared to the GDP and size of the economy, we're not in bad shape at all. Further, even at the anemic growth rates of 2%, if the Government cut nothing, which is to say kept the same budget this year (in terms of dollar expenditure) as they had last year (basically actually made the budgeting process 'net zero' so any new spending was matched by an equivalent cut) the country would be running a surplus in slightly more than 15 years. With 3 trillion in current revenue, 2% growth compounded over 15 years gets us to 4 trillion in annual revenue. Even running a half trillion dollar defict we 'win' by not spending any more. But it does depend on us having the discipline to do that.

Paying one cent less than is due constitutes a default. This is what people don't seem to understand.

The US defaulting doesn't mean all the bonds disappear. It doesn't mean nobody gets any of their money. It means the US doesn't fully meet its contractual obligations.

Scale this back: You only pay half of your mortgage payment one month. That means you're in default. Does your obligation disappear? No.

Were the US to default, the important questions are "By how much?" and "How long will it take to fix this?". Only once those questions are answered can you begin to answer the question of what other entities' debt ratings should be.

EDIT: Not all bonds would go into default at once, either. The US could pay some in full and not others, and could pick and choose which got paid how much. Country X that only has a limited amount of US debt might get shafted, while country Y that depends heavily on US bonds gets paid in full. What's the actual consequence there? Not much. Country X is mildly inconvenienced, Country Y has no problems.

This is way more complicated than 2+2=4.

You make good points, but the comparison to a mortgage payment is not one of them. My missed mortgage payment affects my credit rating, but not the credit rating of the bank who holds my mortgage because they hold thousands of other mortgages. Despite the bank's leverage, my mortgage is still a tiny portion of their balance sheet. I could stop paying altogether and no big deal. Not so with US Treasuries. They are the foundation for basically every conservatively managed balance sheet. It's the old saying: if you owe the bank a million dollars you have a problem. If you owe the bank a billion dollars the bank has a problem. I agree this is way more complicated than 2+2=4, but Standard & Poor's inability to do even basic math (http://uk.reuters.com/article/2011/08/07/uk-usa-rating-sp-wh...) leads me to assume they are incapable of figuring out the network effects of a US default of any kind or degree.