In Washington, this is the definition of no risk.
kNOw your RISK!
And now, Geithner gets a few more years on his job, because that's how Washington works!
So what does it mean for the markets? It just means that gold becomes, once again, the favored currency of choice--that "barbaric relic" that people buy because, according to Bernanke because "gold isn't money" but they hold it because of "tradition!"
But as a practical matter, can we ever default when you can print your own currency?
Only if nobody accepts your dollar. And last I looked, all the unemployed will take any dollar from Uncle Sam.
As a practical matter, the downgrade is just headlines, but that will scare investors. Eventually, the gradually depreciating dollar will have inflationary effects---but that's hard to come by when the Uncle Sam Greenback is still scare on the intersection of Unemployed and Laid Off, if even they think otherwise on Wall and Broad!