US Credit Rating downgrade by Standard and Poors
US Credit Rating downgrade by Standard and Poors
Standard and Poors actually did downgrade the US credit rating from AAA to AA+. They had informed the White House at about 2pm on Friday.
The White House checked the numbers that the credit rating downgrade was basedon, and they found a 2 Trillion dollar error. They pointed this out to the S&P, however, the debt rating agency did not revise their rating.
The reason they did not change the rating was because they pointed to the internal issues that the US Government has with it’s inability to balance the budget.
They pointed to the fact that without fiscal responsibility and a good financial plan for the US, it is only a matter of time before the Government defaults on its fincancial obligations.
So, what does this all mean?
Well, first of all, the effect of a lower credit rating is very much the same as an individual.
When your credit is less than stellar, you have to pay more for loans. As such, it is possible that it will cost the US more to borrow to finance our deficit.
That will make things more expensive, and it may quite possibly end up making things more expensive for everyone.
Things like Mortgage loans, car loans, lines of credit, will all now carry a higher interest rate.
The other concern is that the credit downgrade will push the economy back into recession.
On the international front, Asia countries who own most fo the US bonds are upset. They are concerned about a devaluation of the US debt that they carry.
The other question is, what about the US treasuries being the most secure? and What should people park their money in?
Even though the debt rating was downgraded, US Treasuries are still the most secure form of security. There is no better or safer option.
The US and the world stage is waiting to see what effect the credit downgrade will have on Wall Street on Monday.
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Tagged with: credit downgrade • standard and poors • US Credit rating • US treasuries • wall street
Filed under: Credit
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