Your Decline and Fall Moment of the Day comes from Standard & Poor’s, the credit-ratings firm that was a core cause of the financial crisis and economic catastrophe.

The press reported late tonight that S&P was about to downgrade the sovereign debt of the United States from AAA, despite last week’s debt-ceiling deal—a momentous decision surely not taken lightly and based on bulletproof analysis.

But hold on! The Obama administration looks at it for a couple of hours and phones up S&P to tell it that its math is all wrong.

S&P officials notified the Treasury Department early Friday afternoon it was planning to downgrade the U.S. government’s debt from the AAA rating it has held for decades, a government official said, and it presented its report to the White House. S&P has previously warned such a downgrade might come if Washington didn’t move to comprehensively tackle its long-term fiscal woes.

After two hours of analysis, Treasury officials discovered that S&P officials had miscalculated future deficit projections by close to $2 trillion. It immediately notified the company of the mistakes.

I’m going to give you a brief synopsis of events here. The financial crisis wouldn’t have happened without S&P (and Moody’s) conflict-riddled AAA ratings of toxic mortgage bonds laundered by Wall Street. Obama and Congress did nothing to rein in the power of the ratings firms after this became apparent to everybody. These same raters, still with government-granted monopoly power and an outsized role in markets, tell Treasury they’re going to downgrade the most widely held financial instrument in the world.

Treasury, in two hours, looks at S&P’s analysis and says, “You idiots missed $2 trillion.” S&P says, “Hey, you know what? You’re right. Oopsie! But we still may downgrade you.”

And this is how our system works. These are the people we’ve empowered with our economic future.

— Paul Krugman notes that, just as the mythical bond vigilantes are in full retreat, with Treasury bond yields nearing all-time lows, inflation is beginning to tumble again.

A little while back many people made a big deal over the fact that measures of core inflation, if you took monthly data at an annual rate, were running above 3 percent. Some of us tried to make the case that this wasn’t really reflecting a big rise in underlying inflation, that it was mainly “contamination” of the core by transitory effects of commodity prices; but this brought much jeering.

Anyway, you should know that just about all measures of core inflation have now subsided rather dramatically…

Guess what: inflation is not taking off, it’s slumping back to around a 1 percent annual rate.

That not only signals a terrible economy, it makes it harder to pay off debts, both private and public.

Can anyone tell me a major thing Krugman has been wrong on in the last three or four years?

— Here are the last three paragraphs of a Journal Heard on the Street soothingly headlined “Stress Indicators Don’t Signal 2008 Repeat”

However, other indicators are at danger levels. The iTraxx Senior Financials credit default-swap index, which measures the cost of insuring the debt of 25 large European banks and insurers for five years, hit a record Friday at €212,000 to insure €10 million of debt, above levels seen in March 2009. That is worrying: High long-term bank-funding costs will hit the cost and availability of credit for the wider economy, reinforcing doubts over economic growth and fiscal sustainability.

But Spanish and Italian bond spreads versus risk-free bonds may prove the best indicator of whether a repeat of 2008 is in store. These have recently reached euro-era records. A further selloff could trigger calls for extra margin from LCH Clearnet to clear bond trades. When Irish and Portuguese bonds were hit with margin increases, it proved a decisive moment; faced with independent confirmation that the bonds contained credit risk, investors rushed to sell.

Until the euro zone finds a way out of its sovereign crisis, the risk of a 2008 moment remains real.

So much for that reassuring headline.

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Ryan Chittum , a former Wall Street Journal reporter, is deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu.