US Credit Rating (AAA) Downgrade In 2011: What Does This Mean For USA?

This is probably what Tables can be turned means.  Today, the country that was known to be the most powerful, the biggest of them all seems to be going through a tumble in the financial world. Has the United States of America become a bad cookie in the jar of cookies? Will the country be labeled as bad financial risked? These are some questions that arise in the minds of those across the world on seeing the Standard & Poor’s ratings.

The “breaking news” announcement by S& P came to light after the Wall Street’s week of turmoil which dint seem to fizzle out. 

S&P is the ultimate in ratings related to credit worth of debt for both Government and corporate. Today, they have ranked USA as AA+ risk, a step down from their earlier AAA rating, which was the top gold standard rating for zero risk lending. This was history in the making; USA had not lost their triple A rating ever.

However, some of the other rating agencies such as- Moody’s and Fitch have clearly stated that they have no plans as of now to downgrade the US credit rating.

Why did US tumble in the rating?

Standard and Poor’s  have stated that US  “falls short” from what is “necessary to stabilize the government’s medium term debt dynamics”  and have gone on to criticize the US government’s policy makings and the political institutions

With the downgrade of rating by S & P, there is a worldwide reaction with heavy declines in share prices and money values. Within a fraction of minutes, there was a drastic wipe in market value, with nervous investors scrambling about to liquidate their shares and stocks.

What does this mean for USA?

A lower credit rating translates to the US Government being in a position to pay more interest on the debt in order to attract new lenders.  Purchases made via credit cards, Consumer & commercial loans, mortgage rates will then require an increased interest and maybe even higher fees.

Even though the AA+ credit rating is just one hop away from the top AAA rating, the perception around the globe on USA’s ratings reflects that there is financial trouble or turmoil. This in turn will have an impact on everything related to money across the seas- values & prices. A financial projection clearly indicates – US national debt over the coming years will only go up and there seems to be no solution in sight.

Wonder what the USA is going to do on this now? Any Comments

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