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What is gonna Happen Next with the Triple-A Credibility

2 points| varul | 14 years ago | reply

The Democrats and Republicans in strong disagreement to raise the country’s maximum debt than the current debt range maximum 14.3 trillion. To continue its borrowing and pay the bills, the World’s biggest financial system should reach an agreement on or before Augest 2 deadline. If they fail to an agreement, it may cause their accolade triple-A credit rating down and would increase the cost of borrowing for American citizens and businesses. Already the worst economic crisis swept the World in the year 2008. Could the uncertainty of future US debt trigger another economy crisis?

4 comments

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[+] anonymoushn|14 years ago|reply
Have any ratings agencies threatened a downgrade based on a failure to reach an agreement? S&P has threatened a downgrade if we raise the debt ceiling without taking action to reduce the deficit significantly. However, assuming that we fail to reach an agreement, we will immediately reduce our deficit to zero and continue to be able to service our debts. Why would we expect this to trigger a downgrade?
[+] btmorex|14 years ago|reply
Everything I've read suggests that a downgrade from AAA to AA+ or AA would have have little to no effect on interest rates. The only downgrade that really matters is from "investment grade" to "junk" status because that prevents many institutional investors from buying bonds.

Also remember that most large institutional investors do their own investigation and don't necessarily rely on the ratings agencies.

[+] irisdai|14 years ago|reply
At the end, it'll be a currency problem or war. Since US$ shifted from gold-backed to oil-backed in the 70s, it only need to focus on making sure oil is traded in US$, so other countries has to earn US$ to pay for oil. It would be eye-dropping to see US gov. doesn't print money to pay its debt. If that happens, who knows what's next.