"The theatre, when all is said and done, is not life in miniature, but life enormously magnified, life hideously exaggerated." Those words were uttered by writer and satirist H.L. Mencken nearly 100 years ago yet are every bit as relevant.

Today, having just witnessed America's torturous debt ceiling negotiations, Sir Martin Wolf, the Chief Economics Commentator at the Financial Times describes it this way. "The politics were extraordinarily ugly...but it was great theatre that reached the conclusion I expected and in terms of fiscal action, a lot of sound and fury basically signifying very little," he says.

What's worse, after dragging the nation and the world into our domestic spat, Wolf says we'll have another round of this to look forward to a little over a year from now.

Having crafted, covered, and commented on economic policy for more than 40 years, Wolf has seen plenty. While this Londoner describes his own country's fiscal austerity measures as "too severe" and "not very wise," he says Europe is "in its own dysfunctional way even worse, a bigger mess." He says the latest offering from the U.S. - or what we know of it - looks comparatively timid.

"When you actually run the number, it doesn't look very serious against the deficits and debts," he says. We're talking $2.1 Trillion over 10 years sounds astronomical but it's roughly an average of 1.5% a year in a country that is running a fiscal deficit close to 10% percent of GDP. In addition, any "credible long term plan" would need "both revenue increases and serious spending reductions, above all in the healthcare sector."

So what would be serious and credible in Wolf's opinion?

"Spending as a share of GDP in the U.S. can't be much above about 22% of GDP. That means you probably have to take out 4 to 5% of GDP." And that is something he and almost everyone involved in the process knows would have serious impact on the fledgling recovery.

So instead of complaining that everybody lost and nobody won, Wolf offers an alternative reaction: "You could say, thank God there is nothing really dramatic here."

The next issue to be resolved is whether or not the U.S. loses its AAA credit rating. "My guess is, unless something rather dramatic happens to the economy and revenue really starts coming in, the U.S. is quite likely to lose its AAA rating at some point in next few years because debt is on an explosive path."

But even so, he says "I don't think it will make any difference to anybody's willingness to buy U.S. Treasuries because they have to," adding this bonus barb to Moody's and Standard & Poor's.

"If the rating agencies are ever helpful...it's in bringing information on securities that are difficult to evaluate on your own. U.S. Treasuries are the best understood securities in the world...the ratings agencies add zero to one's knowledge of the U.S. treasury market."

Do you agree? Does the AAA rating even matter? Are the ratings agencies irrelevant in this arena?

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