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S&P Downgrade of United States' Credit Rating

S&P's downgrade of the United States' credit rating.

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A Quick Tip by Sharrie

  • Aug 7, 2011
  • by
It comes at the worst possible timing ever! Markets are in for shocks and aftershocks. Not caught off guard but there will be lots of repercussions for the world at large! With the twin crisis both in Europe and US, time to run for cover if you haven't already! Markets expected to drop more in coming days, if not weeks!

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review by . August 08, 2011
Nowhere to run!
We are at a situation where whatever we do, it just doesn't feel right. The question asked by many investors is where to invest then? What to invest and what exactly one should do or act on?      Well, if you are the few lucky ones who are debt free and still have lots of extra cash or financial papers or real estate, then congratulation to you. This is not of a survival matter. Whatever you have are more than you need and you can afford more than the rest of the world. You'll …
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Sharrie ()
Ranked #3
I'm a traveler at heart & have been nicknamed Travel Queen by friends & colleagues alike. Traveling has been my life passion for the last decade or so. As we enter a new decade, I'm excited … more
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On August 5, 2011, S&P lowered the United States' sovereign long-term credit rating from AAA to AA+. The S&P press release sent with the decision said, in part:

  • "The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics.
  • "More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011.
  • "Since then, we have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government's debt dynamics any time soon."

The following day, S&P acknowleged in writing a USD$2 trillion error in its calculations, saying the error "had no impact on the rating decision" and:

"In taking a longer term horizon of 10 years, the U.S. net general government debt level with the current assumptions would be $20.1 trillion (85% of 2021 GDP). With the original assumptions, the ...
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