•Nightmare on Wall Street
The US has lost its AAA credit rating from Standard & Poor's in a shock reversal of fortune for the world's largest economy.
On Saturday 6 August 2011, 12:12 EST
AAP
The United States' credit rating was cut for the first time when Standard and Poor's lowered it from triple-A to AA+, citing the country's looming deficit burden and weak policy-making process.
Standard and Poor's on Friday revised the nation's rating downwards to a AA+ with a negative outlook, despite a push back from the White House, which said its analysis of the US economy was deeply flawed.
It was the first time the US was downgraded since it first received a triple-AAA rating from Moody's in 1917; it has held the S&P rating since 1941.
Moody's and a third ratings agency, Fitch, say they continue to study the deficit plan to see if the US merits being kept in their ranks of AAA countries.
The blow came after the White House, Democratic and Republican legislators finally agreed on Tuesday to a deal to raise the nation's debt ceiling after months of wrangling that sent jitters rippling through the global economy still trying to recover from the 2008 recession.
A debt downgrade will be a symbolic embarrassment for President Barack Obama, his administration and the Americans, and could raise the cost of US government borrowing.
Since the dollar and US Treasury bonds are so central to world trade and finance, a downgrade theoretically could rock the global economy, which is already being battered by the eurozone crisis.
But some analysts have questioned whether a ratings cut would impact demand for US debt, have dismissed the raters as having low credibility, and questioned whether the markets would take much notice.
Ratings agencies Moody's and Fitch both reaffirmed their AAA rating of US debt shortly after Obama signed a bill raising the debt ceiling on Tuesday.
The downgrade technically signalled that it is more likely than before that the United States could renege on its debts.
There was no immediate comment from the White House or the Treasury on the reports.
But a source close to the discussions said: "There are deep and fundamental flaws with the S&P analysis."
S&P is considered the most influential of the three major rating agencies.
It has been the most aggressive in moving towards a US downgrade. On April 18, S&P lowered its outlook attached to the AAA rating from "stable" to "negative", citing the absence of a credible plan for reducing Washington's huge fiscal deficits.
In July, during the protracted standoff over raising the government's debt ceiling between Obama and Republicans, S&P placed the United States on credit watch and warned there was "at least" a one-in-two chance that it would cut the rating within 90 days.
S&P also suggested any deficit plan needed to trim about $US4 trillion ($A3.84 trillion) over 10 years; the plan that has passed only envisages cuts of up to $US2.4 trillion.
There are currently 17 nations boasting a AAA debt rating from S&P along with three other territories - Hong Kong, Guernsey and the Isle of Man.
Moody's, the oldest credit agency, placed the US on a downgrade watch on July 13 and upheld its rating on Tuesday after congress passed the last-minute deal which avoided a debt default.
But Moody's also added a "negative" outlook to its rating, warning it could still downgrade the United States if the deficit-slashing plan goes astray, if fiscal discipline weakens, or if growth deteriorates significantly.
Fitch opened a review of the US rating on June 8 and said it would be completed by the end of August.
After the debt deal was clinched, Fitch said the United States would keep its AAA rating but warned it was under review.
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120 comments
SearchRichSingles.CoM
1 minute ago Report Abuse
Ḏear, the naᶆe is where you can meet weaɭthy sinɠles, who are seařching főr their spećial someoňe. *^o^*
sssssssssssssssss
Rob
3 minutes ago Report Abuse If you have invested in Gold or silver I hope that you have the hard metal in your hands and in a bank safe deposit box and not just on parer.
M
4 minutes ago Report Abuse Time to let the Communist Party of China run the world - they have proven that they can mix capitalism and socialism and steer a middle path avoiding both Soviet style stagnation and US liberalism whilst growing the economy at the same time.
phonebox
5 minutes ago Report Abuse propersition 21 will tell you what is really going on with world government wealth shearing
Joel
5 minutes ago Report Abuse I think the bloody G. Bush should get blame first of all. He screwed the hole for Obama to fill.....
Australia is going down if China goes down not long from now....wait and see......
Universities need Chinese students to pay the fees, and everything is made in China......
When the West needs so much help from Asia...can they still racist Asian?
phonebox
9 minutes ago Report Abuse government should know you carnt loan money to pay a debt .when you already carnt pay back what we already owe .same as the us is happening here
bronwyn
4 minutes ago Report Abuse
Let's start at the top, why are CEO's being paid the amount of money that could be a big help to our failing health system. Then cut unnecessary spending that the government says it would be an improvement which never gets done or is done just to get the quick buck and never done properly .
We have a great country but why aren't we looking after own, no such thing as a free lunch but some are having a feast. Look at the amount we could be making if people were treated equally and worthy of what is deserved for their stature like our doctors.I do believe that people are living beyond their means which is seeing our credit cards racking up some serious debt each year. Plastic is not always the best alternative, laybys don't have a interest rate and it's not being used to benefit at by most Australians. No extra spending fees or/and charges that everything seems to accumulate these days. For governments to fill their empty pockets due to their lack of control and consultations of what is really necessary instead of fruitless spending and taxes.
Cs.
15 minutes ago Report Abuse
All good&bad things must come to an end in order to turn around.
mickster82
16 minutes ago Report Abuse aaccording to commsec etc we are immune we have no housing bubble here, we rely on China they all say. what about there little housing bubble?, there out of control credit system what do we do when the china bubble bursts??
manufacturing in the us is bleak at best when gov spending stops everything will go with it because the private sector has not come back to the ball game.
deborah
17 minutes ago Report Abuse
All great empires fall eventually. There was ever going to be one ending for capitalism. Capitalism and all socioeconomic ideologies are all brilliant in their pure forms, but, man being man, greed corrupts it all. Wouldn't it be amazing if we had the perfect blend of capitalism, communism and socialism, the world would be amazing. Oh and Pluto is in Capricorn for 16 years. This means an upheaval of all systems that no longer work,( especially in government and business), are being destroyed to make way for the new. It also means more extreme temperatures in weather and more natural disasters. Nature(God/Goddess) has had a gutfull and is sorting us out. Freaky stuff huh?!
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