Fiscal Cliff debate and upcoming Debt Ceiling fight … will the US credit rating be downgraded again?

View Comments

Just thinking out loud … When S&P downgraded the US in August 2011 one of the important factors they cited was political turmoil:

  • the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011
  • The political brinksmanship of recent months highlights what we see as America’s governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed. The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy.

With the current Fiscal Cliff tussle being played out, and with more to come in the next 2 months (debt ceiling debate), will S&P downgrade the US credit rating again?

 

Author: Eamonn Sheridan

Eamonn Sheridan worked with Bankers Trust Australia for 13 years as a Spot foreign exchange dealer, trading across all major currencies and all time zones. He rose to a Vice President position, running spot operations during the busy European time, leaving the bank just prior to it being sold to concentrate on running his own business in the ‘real world’! The markets, however, had him hooked – he continued to trade equities, CFDs and then on to futures, giving him broad experience across financial markets. He is now active in FX and equity index futures as well as writing for ForexLive™. Eamonn is a graduate of The University of Melbourne in Australia and lives in New South Wales.

2 Comments

  1. I would think if the US actually went over the cliff, it would not be downgraded due to increased taxes and cuts to spending. In fact anything but going over the cliff should induce a downgrade, especially the deal from the senate which according to the CBO adds $4 Trillion more to the debt.

  2. US credit rating will most likely be downgraded again sometime in the next 4 years. It will come as the result of some kind of financial turmoil brought on by world events. ie – war or 2-3 nations “ganging up” on US to cripple us financially by making a run at our currency – or some such scenario.

    We are going along day-to-day as though things are normal and stable. They are, in fact, not. We have huge growing debt and an unstable world. One day it will have a major upheaval. People will write columns about how they saw it coming. Or – how could we have missed this?

    The world is generally learning to accept the fact that we now have debt we will never pay back. Other countries and US holders of debt are simply looking for best option to get out from under it.

Top

© Copyright 2014 ForexLive™  |  Advertise With Us  |  Login To Comment  |  Sitemap

HIGH RISK WARNING: Foreign exchange trading carries a high level of risk that may not be suitable for all investors. Leverage creates additional risk and loss exposure. Before you decide to trade foreign exchange, carefully consider your investment objectives, experience level, and risk tolerance. You could lose some or all of your initial investment; do not invest money that you cannot afford to lose. Educate yourself on the risks associated with foreign exchange trading, and seek advice from an independent financial or tax advisor if you have any questions.

ADVISORY WARNING: FOREXLIVE™ provides references and links to selected blogs and other sources of economic and market information as an educational service to its clients and prospects and does not endorse the opinions or recommendations of the blogs or other sources of information. Clients and prospects are advised to carefully consider the opinions and analysis offered in the blogs or other information sources in the context of the client or prospect's individual analysis and decision making. None of the blogs or other sources of information is to be considered as constituting a track record. Past performance is no guarantee of future results and FOREXLIVE™ specifically advises clients and prospects to carefully review all claims and representations made by advisors, bloggers, money managers and system vendors before investing any funds or opening an account with any Forex dealer. Any news, opinions, research, data, or other information contained within this website is provided as general market commentary and does not constitute investment or trading advice. FOREXLIVE™ expressly disclaims any liability for any lost principal or profits without limitation which may arise directly or indirectly from the use of or reliance on such information. As with all such advisory services, past results are never a guarantee of future results.