The S&P credit rating company decided to finally downgrade the US to AA+. This is the first downgrade by a major credit rating agency in the history of the US. The Obama administration seemed to be surprised by the turn of events with the treasury saying that the S&P had made mistake. “A judgment flawed by a $2 trillion error speaks for itself,” said a treasury spokesman referring to the administration’s claim that the S&P is basing its decision on estimating the discretionary spending to be 2 trillion higher than it really is.
Despite the disagreement on the the size of the discretionary spending the S&P said that it was the lack of cutting the US debt by 4 trillion dollars as they wanted.
The downgrade comes at an auspicious time as investors have already begun jumping out of the market. This will increase the desire to seek safer havens for cash.
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