Just another report from our nearly daily QE3-watch.

It now appears that S&P is threatening to downgrade U.S. debt if the United States doesn't use its "monetary flexibility" to address the debt problem. That's another way of saying they want QE3.

The risk of a downgrade to the credit rating of the United States has increased due to a lack of political consensus on how to employ the country's balance sheet flexibility, Standard and Poors' said on Tuesday.

"Theoretically, there's a lot of flexibility on the fiscal and the monetary side: you have a central bank that can expand its balance sheet, and that's a real boon," Moritz Kraemer, head of sovereign credit ratings for Europe at Standard & Poor's, said on Tuesday.

"But the problem is this flexibility needs to be employed and for that you need political consensus. That's not very visible right now."

When you talk about "monetary policy" you're talking about the Federal Reserve. When you talk about the ability to "expand its balance sheet," that's printing money.

I looked for the full S&P statement and couldn't find much beyond the quotes in this article, but it sure look to me like S&P is threatening to downgrade America's credit unless the Federal Reserve engages in QE3-like behavior.

And while QE3 would be destructive, I suppose I can see S&P's point: With Russia, China, Europe, and Japan pretty much stepping back from U.S. debt for various reasons, it would seem that if the Federal Reserve doesn't print money we won't be able to borrow enough to pay our bills (absent a political breakthrough in Washington to reduce spending). So in that sense I can see why not printing money would be an instant threat to our credit.

Of course, printing money also presents other dangers that might present themselves either in the near-term or medium-term. But I guess from S&P's point of view the threat of an immediate default due to there being insufficient sources from which the U.S. can borrow is the more pressing threat.