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Sunday, August 07, 2011

Reason why US rating was downgraded


What is a downgrade?

Standard & Poor's, one of the three major credit rating agencies that assign scores to debt issued by institutions, municipalities, and governments, said there is a heightened degree of risk in holding debt issued by the United States. So it lowered its rating from the AAA, the highest possible level, by one notch to AA+. It also said the outlook is negative.

Why did it lower the rating?

The credit rating agency believes the outstanding debt of $14.3 trillion and projected deficits for coming years in the United States no longer warrant the top-tier rating that it had assigned to the United States since 1941. It also said that the political environment does not build confidence that the United States can agree on how to lower the deficit in a meaningful way any time soon.

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