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The credit rating for US debt was already downgraded once. Is it possible that it will happen again? And what does a debt downgrade have to do with me anyway?
The Debt Downgrade
If you’ve watched any news program or visited any news website, you probably know that the United States’ credit rating has fallen from it’s AAA rating for the first time ever.
It is still near the top of the credit ratings at AA+. But the country mayl still suffer economic consequences from this move.
With global stock markets tumbling and political fallout in Washington, the last thing most of us want to hear about is another downgrade. However, Standard and Poor’s (S&P) is warning of just that.
S&P’s managing director, John Chambers, puts the chances of another US downgrade at 1 in 3.
In other words, the odds are against it, but they are significant nonetheless given the potential severity of such a move. Such a downgrade would take place over the next 6 to 24 months. This would all be dependent on whether or not the fiscal condition of the United States continues to deteriorate and whether or not political gridlock continues.
A Chance For Redemption
Although the US has suffered it’s first credit downgrade, it is possible for it to regain the coveted AAA rating again. However, this will not be an easy task.
Other countries who have lost this ranking in the past have taken 9 to 18 years to regain it.
What Happens If There is Another Downgrade?
If another downgrade actually happens, the aftermath is sure to be troublesome.
Just look at how investors and politicians have reacted to the recent downgrade. A second downgrade would likely be a more significant blow than this one. It would be a sign that America may be on a very serious downslide – if it isn’t already.
Think about it this way. What would two consecutive downgrades for a country that never suffered a downgrade previously do to your confidence that it is going in the right direction financially? You’d probably want a good deal more interest on any money that you invested to compensate for your risk. T
hat would mean that the United States would have to pay even higher interest to attract investors. Meaning that the taxpayers would be carrying even more debt on their backs.
I don’t know how you feel, but that debt is already getting awfully heavy!
The US has suffered it’s first downgrade and many are scrambling to save face, invest wisely, and figure out who is to blame.
While another downgrade is possible in the future, it is still likely that it will not happen. At least according to S&P.
For now, the world is intact and the markets are suffering one of the many large bumps in the road in recent years.
While – other than voting – you do not have much of a say in the current state of affairs, you still can control your personal finances. Do so to the best of your ability and, as scary as this sounds, leave the rest to the politicians.
After all, you’ll have your say in the matter next November.