Nightmere Comes to Life Standard and Poors Rating Agency Downgrades US Debt AA Plus!

Breaking News: Standard and Poor one of the major credit rating Agencies  announced late Friday the  US lost it prestigious AAA rating and placed in negative outlook for other downgrade within the next two years. The reason  the debt reduction plan for the US was insufficient.  S&P  stated that the US need to cut 4 Trillion Dollars from debt. The plan that passed on Tuesday only cuts 2.5 Trillion Dollars from the debt. It ‘s seen that the US was not serious  about debt reduction. From Washington Post:

Standard & Poor’s announced Friday night that it has downgraded the United States credit rating for the first time, dealing a huge symbolic blow to the world’s economic superpower in what was a sharply worded critique of the American political system.

Lowering the nation’s rating one-notch below AAA, the credit rating company said “political brinkmanship” in the debate over the debt had made the U.S. government’s ability to manage its finances “less stable, less effective and less predictable.” It said the bi-partisan agreement reached this week to find at least $2.1 trillion in budget savings “fell short” of what was necessary to tame the nation’s debt over time and predicted that leaders would not be likely to achieve more savings later on.

The decision came after a day of furious back-and-forth between the Obama administration and S&P. Government officials fought back hard, arguing that S&P made a flawed analysis of the potential for political agreement and had mathematical errors in its initial report, which was submitted to the Treasury earlier in the day. The company had overstated the U.S. deficit over 10 years by $2 trillion, officials said.

“A judgment flawed by a $2 trillion error speaks for itself,” a Treasury spokesperson said Friday.

Reaction from the markets is unknown. Monday(actually Sunday afternoon when Japan, Hong Kong and Sydney exchanges open first) we will see the markets express their concerns.

Reaction from the politicians will be strong to say the least.  The Tea Party will feel vindicated. Look out  folks we can wonder will interest rates will climb.

The other major credit rating agencies Fitch Ratings and Moody’s Investment Services did not downgrade the US credit ratings although Moody’s  placed the US on negative outlook.

Oh boy its the only August 5th and the month just begun.

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