Monday, April 18, 2011

S&P Keeps US AAA, Drops Credit Outlook to 'Negative' (But I'm sure it's not political)

S&P Drops US Credit Outlook to 'Negative' - They say there's 'material risk' that politicians won't fix fiscal problems:
Standard & Poor’s reaffirmed America’s AAA credit rating today, but dropped its outlook to “negative,” saying there was “material risk” that US policy makers wouldn’t figure out how to handle the nation’s fiscal woes by 2013. “If an agreement is not reached and meaningful implementation does not begin by then, this would in our view render the US fiscal profile meaningfully weaker than that of peer ‘AAA’ sovereigns,” the report said.
And we care how S&P rates things why, exactly? They still had AIG in the AA range ("Very strong capacity to meet financial commitments") until mid-September, 2008 -- only downgrading from AA- to A- on Sept. 12, 2008. (A range means, "Strong capacity to meet financial commitments, but somewhat susceptible to adverse economic conditions and changes in circumstances.")

Image via Deloitte

That said, one way of interpreting their ratings may be to translate anything less than AAA+ as "the building is on fire."

Large, wealthy nations have AAA credit because they ability to levy taxes to meet their debt obligations. If anything, the greatest risk to our national credit rating would seem to be the Republicans' apparent desire to stop taxing those that actually have money.
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