The big worry is that the world is now looking at the US with suspicious eyes and might not be so inclined to fund our debt anymore. If/when that happens in force we are in for a world of hurt.

Thats the problem I see as well. The market has a history of punishing participants for fraud pretty severely. Look at Lucent for an example.

Now consider that basically the entire United States has been committing securities fraud. How is the world market going to respond to buying our debt?