Monday, April 18, 2011

S&P downgraded its outlook on the U.S. credit from "stable" to “negative,"

Sounding the alarm about the country’s deep fiscal problems, Standard & Poor’s on Monday downgraded its outlook on the U.S. credit rating to “negative," raising the likelihood the U.S. will lose its coveted 'AAA' rating as Washington struggles to fix its beleaguered balance sheet.

The move signals the seriousness of the debt crisis in the U.S., which at most times is considered the safest investment in the world. It is likely to increase pressure on lawmakers and the White House to bridge their wide gaps and could mark the first step to the U.S. losing the perfect credit rating that allows it to tap the capital markets at very low rates.


S&P said the negative outlook means there is a one in three chance of the U.S. losing its 'AAA' rating.
The full story is here.

6 comments:

Anonymous said...

This is BIG - truly HISTORIC!! No matter what spin politicians try to put on this act it has never happened before - a financial rating agency telling it like it is...

OhioJOE said...

More fruit from the Generalismo's WAR. Thanks a lot, GOP Congress.

John said...

If the US loses it's AAA rating, it will soon default I'm afraid. Loans will just turn too expensive.

Although, a semi-default by printing money in even greater amounts than today to pay off the debt is more likely I'd say. It would bring inflation to the skies, but a technical default could be avoided.

The effect on the interest rates that would be required by lenders in the future would be the same though.

hamaca said...

This would have been building up since much earlier than when the GOP took control of the House.

John makes important points. Putting it another way, it will cost much more to service the debt, i.e. pay the interest. We have limited tax-payer funds as it is--now a larger portion of those funds would be re-allocated to interest payments rather than something better or even lower taxes.

This could be significant as an anti-Obama campaign issue--with the right candidate who is able to articulate what is happening and what to do about it.

OhioJOE said...

"This would have been building up since much earlier than when the GOP took control of the House." Absolutely, but the new GOP congress did not help by caving.

John said...

All the professors and PhD students I have talked to at university have agreed that Ireland will have to default in just a few years, and probably the US as well.