WASHINGTON: In an unprecedented move, credit rating agency Standard & Poors downgraded the US governments AAA sovereign credit rating - a development which raises concerns that investors will lose confidence in its economy.
We have lowered our long-term sovereign credit rating on the United States of America to AA+ from AAA and affirmed the A-1+ short-term rating.
We have also removed both the short- and long-term ratings from CreditWatch negative, S&P said in a statement.
The downgrade, it said, reflects its opinion that the fiscal consolidation plan which Congress and the administration recently agreed to falls short of what, in our view, would be necessary to stabilize the governments medium-term debt dynamics.
More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policy making and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011, the agency said.
Since then, we have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the governments debt dynamics any time soon.
Other prominent credit rating agencies - Moodys Investors Service and Fitch Ratings - affirmed their AAA credit ratings even as President Barack Obama signed a bill that ended the debt-ceiling impasse that pushed the Treasury to the edge of default. Moodys and Fitch also said that downgrades were possible if lawmakers fail to enact debt reduction measures and the economy weakens.
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Rajesh Batreja (India)
4 mins ago (12:56 PM)
USA should have been downgraded to A only, way back in 2008. S%26P was sleeping all this while & has taken only a partial view of the debt crisis. US debt crisis is far deeper than what is being presented to the World.
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Shrinidhi (Bangalore)
5 mins ago (12:55 PM)
Dollar is going to collapse because it is not backed by gold. US economy is a consumption driven economy. i.e. Indians, if their earnings is 100, they save 32. In US, if their earnings is 100, they spend 107. i.e. their savings are -7. Hence their debt is increasing. Last 2 times (2000 and 2008) when economy was in crisis the interest rates were around 6 which was reduced to recover from the crisis. This time the interest rate is already at 0.25.. they cannot reduce it further or make it 0, otherwise banks will go bankrupt. US govt cannot give banks bailout since US govt itself is in huge debt. Dollar is going to sink. In few months it will peg at 20 to 25 rs a dollar. Request all Indians to save money instead of spending it. Outsourcing will become tough for US because rupee will not be so low.. Hence software engineers and all related jobs will have to satisfy with lower wages (but that should be fine since rupee will be appreciating). Overall, it is better to be done with the dollar and the whole world moves to Euro. The big American dream has become a nightmare for the rest of the world.
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Debo (Bangalore)
20 mins ago (12:40 PM)
The credit rating, doesnt mean much, except for perhaps scaring investors off. From a laymans perspective, the USA ceased to be its former self since the 08 recession. S&Ps new rating is just a spin-off from the Debt Ceiling fiasco. By the way, Lehman Bros had a rating of AAA from everyone even a day before it collapsed.
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FD (New Zealand)
29 mins ago (12:31 PM)
About time the Americans wake up to reality.
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Ravi Narayanan (Riyadh)
41 mins ago (12:19 PM)
Humpty Dumpty sat on a wall. Humpty Dumpty had a great fall. All the kings men and horses could not put Humpty Dumpty back on the wall.
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