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Deficits, Debt and the Downgrade: Implications for Financial Markets and the U.S. and World Economies
Aug 11, 2011
Publisher: Milken Institute
Was Standard & Poors justified in downgrading the U.S. credit rating to AA+ from AAA? Not at this point, says an analysis by Ross DeVol, the Milken Institute's chief research officer.
The rating agency's $2 trillion mistake has rattled markets and called into question the safety of U.S. treasuries. It has also raised further doubts about S&P's credibility. DeVol points out that a key measure of future solvency shows that U.S. prospects are superior to those of Germany, France, the U.K., Canada and Australia - all of which S&P rates AAA. And don't forget that S&P's involvement in rating mortgage-backed securities contributed to the financial crisis.
But with the rating downgrade already done, what's ahead for the jumpy financial markets and economies at home and abroad?
