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It is nice to be right once in a while. After more or less 3 decades
of double and triple deficits ratings agency Standard & Poor's has
changed the outlook for US government debt to "Negative".
From Reuters:
Standard & Poor's on Monday downgraded its credit outlook for the
United States, citing a "material risk" that policymakers may not
reach agreement on a plan trim its large budget deficit.
While the agency maintained the
country's top AAA credit rating, it said that authorities have not
made clear how they will tackle long-term fiscal pressures.
S&P said the move signals there's at least a
one-in-three chance that it could cut its long-term rating on the United
States within two years.
"Because the U.S. has, relative to its AAA peers, what
we consider to be very large budget deficits and rising government
indebtedness and the path to addressing these is not clear to us, we have
revise dour outlook on the long-term rating to negative from stable,"
S&P said in a release.
U.S. government bond prices fell after S&P's
announcement, while stock futures extended losses and the dollar pared gains
against the euro.
"The headline has enough of a shock value. The initial
reaction is that this is negative for dollar assets across the board."
said Lou Brien, a market strategist with DRW Trading in Chicago.
Outstanding public U.S. debt has swelled to more than 60
percent of total output in the aftermath of the 2007-2009 financial crisis,
and with a budget deficit projected at more than 0.69€ trillion,
is set to grow further.
A U.S. Treasury official said the S&P negative outlook
underestimates the ability of U.S. lawmakers to tackle the country's fiscal
challenges.
The first post of this blog dealt with the questionability of the US
"AAA" rating 6 years ago.
US AAA Rating -
How Much Longer???
Check.
The strategy for 2011 remains unchanged as chances of a simultaneous
replacement of Federal Reserve Notes and Euros with some new funny IMF fiat
currency are rising rapidly with every day.
The Prudent
Investor's Forecast and Strategy 2011
There is no need for a new artificial global reserve currency. Today's new highs in gold proves the oldest universally accepted
currency in the world is back on its way to regain that status again.
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