Thursday, August 4, 2011

What Happens If The U.S. Gets A Sovereign Credit Downgrade?

By EconMatters

After the debt deal is done, I think the biggest suspense of the markets is whether the U.S. will get a downgrade from its current AAA rating by one or more of the three major credit rating agencies.  Both Fitch and Moody's re-affirmed the U.S.'s Triple-A rating, albeit with a threat of possible future downgrade.  It looks like Standard & Poor's (S&P) could be the lone holdout among the Big 3, but some think the major rating agencies would not act in such a 'politically incorrect' way.

Meanwhile, continuing its tradition of going against the Big 3 rating agencies, China's Dagong dealt a fresh downgrade to the U.S. from A+ to A despite the U.S. raising the debt ceiling and averting a default, while U.S-based Weiss already put the U.S. just two notches above junk.

So what happens if the United States does get a downgrade?

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