U.S.: New Credit Downgrade

April 11th, 2012
in econ_news

Econintersect:  More buried news has been found.  Five days ago credit rating agency Egan Jones downgraded the United States from AA+ to AA, according credit-report-2SMALLto an article dated 6 April by Fox Nation.  In July 2011 the same agency downgraded the U.S. from AAA to AA+ just days before Standard & Poor’s did the same.   According to RT.com, analysts say the three major rating agencies may follow suit.  Moody’s and Fitch still have the U.S. with a top credit rating (AAA) but all four agencies have a negative outlook.  RT also quotes analysts who give political gridlock as one of the major reasons for lower credit ratings for the U.S.

Follow up:

Here are some details from Fox Nation:

Egan Jones warned. "Without some structural changes soon, restoring credit quality will become increasingly difficult . . . without some structural changes soon, restoring credit quality will become increasingly difficult." They added that there was a 1.2% probability of U.S default in the next 12 months. The company cited the fact that the US’s total debt, which now equals its total GDP, is rising and soon will eclipse the national GDP; the company sees the debt rising to 112% of the GDP by 2014.

There are some who argue that the credit rating is meaningless because a nation sovereign in their own currency can never run out of money.  See Stephanie Kelton and Derryl Hermanutz for examples.

John Lounsbury


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