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If US Loses Triple-A Rating, Almost Anything's Possible

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posted on Jul, 19 2011 @ 10:22 PM
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That's because characteristics blamed for volatile markets in countries like Italy — high debt levels, slow economic growth, and government gridlock — fairly describe the United States now.

The debt ceiling has been the chief source of market angst lately, but that's a short-term problem.

The greater concern is: What happens if the United States, the risk-free benchmark from which all other assets in the global financial market are priced, loses its coveted triple-A rating? Nobody knows for sure.

But as James Melcher, founder and president of Balestra Capital in New York, puts it, "If the impossible occurs, everything else becomes possible. It would have psychological repercussions that could be serious, and that certainly sets the stage for things to deteriorate."

It isn't a far-fetched scenario.

Standard & Poor's and Moody's Investors Service warned last week that they might cut the U.S. rating without major cuts in spending, even if politicians manage to stave off default by raising the U.S. debt ceiling.

Some fear Congress may never be able to cut the deficit or raise revenues substantially.

The United States is set to run a $1.4 trillion shortfall in the fiscal year ending Sept. 30, one of the largest as a share of output since World War II.


IF US Loses Triple-A Rating, Almost Anything is Possible

So almost anything is possible if the US loses its AAA credit rating. Serious psychological repercussions which would reflect in lower investor confidence and increased borrowing costs, coupled with deteriorating conditions which would all feed on one another to escalate a crisis, much similar to those indebted Eurozone sovereigns. .

A commonly held misunderstanding is that if Congress come to an agreement and raise the debt ceiling, downgrade and its potential repercussions will be averted. This is far removed from the truth. Expect to see the major rating agencies begin to sound alarm bells to the US to begin getting those cuts and deficits down, perhaps a downgrade or two, meaning austerity measures are probably coming very soon. We can only watch this space as it unfolds and wonder if in a matter of months or weeks Congress is passing cost-cutting laws in the form of austerity measures and the situation begins looking more dire and urgent like that in the EU.



posted on Jul, 19 2011 @ 10:28 PM
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I think i just read a thread couple days back that said US credit rating dropped to c- or somehing along those lines. Give it a search.
edit on 19-7-2011 by ThePowerThatIs because: (no reason given)



posted on Jul, 19 2011 @ 10:30 PM
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yep already happened...... read the same stuff



posted on Jul, 19 2011 @ 10:34 PM
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Rating now at AA.

Duracel - the copper top battery - is now what's powering America's pace maker



posted on Jul, 19 2011 @ 10:41 PM
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reply to post by surrealist
 


I like playing this game...more fun than Astroglide Asian Slip n Slide night at the booby bar..........


So......when do they open the salad bar?



posted on Jul, 19 2011 @ 11:29 PM
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Hold on. Which credit rating agency do you guys refer to? My understanding is that the only agencies that have so far downgraded are Weiss and Egan-Jones. Not S&P, Moody's or Fitch at this stage.



posted on Jul, 19 2011 @ 11:31 PM
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Originally posted by surrealist
Hold on. Which credit rating agency do you guys refer to? My understanding is that the only agencies that have so far downgraded are Weiss and Egan-Jones. Not S&P, Moody's or Fitch at this stage.


We forgot to mention that we're actually from the future...


Carry on.



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