Saturday, August 6, 2011

USA Loses AAA Credit Rating, Downgraded to AA+ (Videos) *S&P: Outlook Negative*

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USA owes a grand total of $61.6+ trillion in funded and unfunded liabilities


USA Credit Rating Overview Standard and Poor's lowered the credit rating of the United States of America from AAA to AA+, with a long-term negative outlook, on August 5, 2011. The negative outlook indicates the rating could be lowered again within the next two years. Fitch Ratings continues the USA at AAA, with a stable outlook, but this is currently under review with a report due by the end of August. Moody's Investor Service confirmed the USA at AAA, but with a negative outlook, on August 2, 2011. The USA has never before had less than a AAA credit rating.

Standard and Poor's Update S&P issued a report, "United States of America Long-Term Rating Lowered To 'AA+' On Political Risks And Rising Debt Burden; Outlook Negative". The key points for downgrading the USA to AA+ were:
The debt limit and budget agreement were insufficient to stabilize the medium-term debt outlook.
The effectiveness, stability, and predictability of American policymaking and political institutions has weakened.
Bridging the gulf between Democrats and Republicans over fiscal policy to stabilize debt more difficult than originally thought.

S&P Reasoning S&P stated listed a variety of reasons for the downgrade:
Further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process.
The fiscal consolidation plan that Congress and the Administration agreed to this week falls short of the amount that we believe is necessary to stabilize the general government debt burden by the middle of the decade.
The political brinksmanship of recent months highlights what we see as America's governance and policymaking becoming less stable, less effective, 
and less predictable than what we previously believed.
Elected officials remain wary of tackling the structural issues required to effectively address the rising U.S. public debt burden in a manner consistent with a 'AAA' rating and with 'AAA' rated sovereign peers.
When comparing the U.S. to sovereigns with 'AAA' long-term ratings that we view as relevant peers--Canada, France, Germany, and the U.K. - we also observe, based on our base case scenarios for each, that the trajectory of the U.S.'s net public debt is diverging from the others.

S&P Downgrades U.S. Credit Rating Aug. 5 (Bloomberg) -- Nouriel Roubini, chairman of Roubini Global Economics LLC, Joshua Rosner, managing director of Graham Fisher & Co. and Jim Bianco, president of Bianco Research LLC talk with Bloomberg's Michael McKee about Standard & Poor's downgrade of the U.S. credit rating to AA+ from AAA. Bloomberg contributor Christina Romer also speaks with Adam Johnson. (Source: Bloomberg)


Fitch: AAA in Play? Is U.S. debt in danger of a downgrade? Discussing pending threats to the nation's triple A rating, with CNBC's David Riley, Fitch Ratings.




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