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Why America's credit rating might be cut, and why it matters
Moody's and S&P have warned that the U.S. is in danger of losing its AAA credit rating. How could that happen, and what would it mean?
 
When Standard & Poor's slashed Greece's and Portugal's credit ratings last year, the European markets panicked.
When Standard & Poor's slashed Greece's and Portugal's credit ratings last year, the European markets panicked.
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Two major credit-rating firms have warned that the U.S. is at risk of losing its AAA rating. Analysts at Moody's and Standard & Poor said the U.S. credit rating — currently at the highest possible level — could be downgraded if the country continues on its present course. The U.S. national debt is around $14 trillion and rising, and the government must pay over $200 billion a year just to service it. The credit agencies worry that the U.S. is not doing enough to shrink its debt levels. The consequences of a downgrade could devastate the U.S. economy. Is this really a possibility, and should we be worried?

Something must be done to avert a crisis: If our credit score were downgraded, says Logan Penza at The Moderate Voice, the result would be a "disastrous spiral of the same type that consumed Greece." The cost of borrowing would surge, the dollar would plummet, and it would end in a "remarkably rapid collapse of the country's fiscal structure." The U.S. government must "get serious" about spending cuts and raising revenue. "The clock is ticking."
"Nothing to see here?"

The ratings agencies would never do it... would they? It's true, says Katie Martin in The Wall Street Journal, that the U.S. losing its AAA credit rating would be a global financial disaster. But it's too early to panic just yet. "We have heard these warnings from ratings agencies before." The market knows that the U.S. is acting to boost growth. And besides, "few really believe that the ratings agencies would pull the trigger," knowing the catastrophe it would unleash.
"Shrugging off U.S. ratings risks - for now"

We should ignore these know-nothing agencies: Why are we taking these agencies seriously at all? asks Bill Saporito in Time. After all, they're the ones who put the AAA stamp on subprime mortgage-backed derivatives "like they would Cheese Whiz to crackers," and then had the temerity to argue that they couldn't be held responsible for their opinions. "These are the people who helped make the financial meltdown possible. What, exactly, do they know?"
"Is it time to stop listening to the ratings agencies?"

 

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