US Waves Goodbye To Triple-A Credit Rating
Reuters UK brings us the inevitable news of credit rating agency Standard & Poor’s downgrading of United States debt from its prized triple-A position to AA-plus, citing concerns with the government’s budget deficit and rising debt burden.
As I recounted yesterday, the recent U.S. deal on raising the debt ceiling and supposedly reducing the deficit and debt was a calculated fraud. Instead, the U.S. will increase its borrowing and spending, albeit at a slightly slower rate than projected.
Commenting on the announcement, Republican Senator, Jim DeMint of South Carolina observed very much the same, saying:
The deal Congress just passed over conservative objections has already had its obvious effect, the loss of America’s credibility around the world. The deal was not a serious attempt to solve our spending and debt problem, it was a political solution meant to kick the can down the road. The only real solution to our spending and debt crisis was Cut, Cap & Balance that the president rejected out of hand.
The announcement by Standard & Poor’s was largely expected with the agency having placed the U.S. credit rating under review on the 14th of July. It is therefore unlikely to have much on an immediate impact on the markets. However, the long term implications for the United States and the world economy could be far reaching.
The Chinese, who are currently the biggest single creditor to the United States, were immediately critical of U.S. debt reduction steps (or lack thereof), and called for the creation of a new, stable global reserve currency. The country’s official news agency, Xinhua, said:
The U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone.
China has also strongly urged the United States to cut military and social welfare expenditure, warning that further credit downgrades would very likely undermine world economic recovery and trigger a new round of financial turmoil.
Meanwhile, the BBC’s great Europhile, Mark Mardell has been asking whether the separated system of Government in the United States is to blame for the financial crisis, and wondering if ‘the system itself may not be fit for purpose’.
Much like his former colleagues in the EU, Mark is rather adverse to actual opposition. In their world, the ‘dysfunctional’ government he claims the U.S. system produced has led to the prevention (mainly, in his eyes, by the Republicans and the Tea party) of a serious and unified agreement on the future of the dollar and the United States economy. If everyone would only just agree (or be given no choice in the matter) then the country could easily sort out its economic troubles in a flash – just like the EU. Oh no, wait..!
Still, we in Britain do not have the same system of Government as the United States, so I’m sure we have nothing to worry about. Our economy is so safe in fact that our MPs are able to spend time on much more important business…
