This is not a good thing:
Shares fell heavily on Wall Street on Monday after a leading ratings agency fanned fears of Europe’s debt crisis spreading across the Atlantic by issuing a strong warning about America’s failure to tackle its budget deficit.
In a move seen by Wall Street as a “shot across the bows” of bickering politicians in Washington, Standard and Poor’s said it was cutting the outlook on the US’s long-term rating from stable to negative for the first time since the attack on Pearl Harbor 70 years ago.
The
Wall Street Journal thinks they know why the move by S&P occurred at this time:
There is only one reason the rating agency could suddenly have turned this dark on politics in Washington: President Obama’s speech at George Washington University last Wednesday. Mr. Obama’s “fiscal policy” speech may have sent progressive pundits cart-wheeling, but its political effect was to poison the prospect for budget negotiations.
The president's speech showed he wasn't serious about dealing with the debt problem. The people who have to monitor a country's financial condition can't be fooled by unicorns and rainbows.
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1 comment:
The only surprise is that it's taken so long. Standard & Poor's and Moody's have been woefully behind in recognising the debt levels of other countries that have had to seek IMF bailouts.
The U.S. debt is so astronomical that it is unavoidable that the Treasury will eventually default on its loans.
The markets have known this for quite some time. This is the end of the US$ as the world's default currency - the BRIC nations are where the real wealth is now.
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