Special Edition

US Debt Down-Grade – Special Edition

10 Second Headlines of the Week – August 6, 2011

S&P Down-Grades US Debt

+ S&P down-grades US Debt from AAA to AA+ with a ‘negative outlook’. US has had a AAA rating since 1941.

+ Reflects their opinion that:

  • last week’s fiscal consolidation plan falls short of that necessary to stabilize the government’s medium-term debt dynamics.
  • break down in ability of the Democratic and Republican parties to govern effectively.

+ This down-grade was largely expected.

+ Federal Reserve said the cut would not impact their operations.

+ Chinas says the “good old days” of US borrowing are over and that further downgrades would likely undermine the world economic recovery.

+ China is recommending ‘international supervision over the issue of US dollar be introduced and a new, stable and secured global reserve currency may be an option’.

From our July 28, 2011 10 Second Headlines:

S&P Credit Ratings for G-20 Domestic Debt

AAA Rating: Canada, Australia, France Germany, UK, US

AA+ Rating: None

AA Rating: None

AA– Rating: China, Japan, Saudi Arabia

A+ Rating: Italy, S. Korea

BBB+ Rating: Russia

+ One or more of the 3 agencies may downgrade the US debt to AA+.

+ In 1994 Canada was downgraded to AA+ from AAA, and today we are AAA.

+ Over the past 20 years, debt of developed nations have been downgraded from AAA 9 times, including Australia in 1987 and Sweden in 1991.