The US has lost its top-level triple-A credit rating for the first time in the country’s history, after Standard Poor’s downgraded it to an AA-plus, with an even lower AA rating on the horizon.
The decision comes after the White House and lawmakers reached an agreement over raising the debt ceiling that Standard Poor’s says fell short of what would be necessary to stabilize the government’s debts.
Standard Poor’s stated that the outlook on the US’s long-term rating is also negative, and there is a possibility that its credit rating will be downgraded to AA within the next two years, if they see less reduction in spending than was agreed upon, higher interest rates or new fiscal pressures during that period.
On Friday America’s financial center, Wall Street, closed out its poorest week in more than two years. Even the reported gain of 117,000 jobs did little to boost investors’ confidence.
Standard Poor’s due to release separate ratings for US funds, government-related entities, financial institutions, insurance, public finance and structured finance sectors on Monday, the ratings agency announced.
Despite the downgrading of America’s credit rating, this point in time there is no real alternative to the dollar, economist George Koo told RT.
”There is not any real viable alternative to investing in [the] dollar for those who are looking for safe investments,” he said. “All the other currencies, whether it is a Japanese yen or the euro or others, do not quite have the capacity to take it on.”
”And the US has such a long run that it is going to be very hard to switch all of it overnight,” Koo added. “I think you will see a gradual diversifying into other currencies.”
No investor worth his salt pays much attention to agencies’ ratings, but what is inevitable is that the US is heading for a certain default, believes author and investor Jim Rogers.
“Eventually, the US will default, there is no question,” he said. “That is why people are moving away from US government bonds because everybody knows that the US is in serious trouble and the debt situation is getting worse and worse.”
Jim Rogers added that the US economy has not really recovered from the crisis of 2008, and the recession is still ongoing.
“Unemployment in America is still higher than it was in 2008,” he said. “The American debt has skyrocketed and gone through the roof. America is in worse shape now than it was before.”