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Gazeta Wyborcza Business, Poland

S&P's Negative U.S. Credit Assessment Breaks 'Global Taboo'

 

"Up to now, the economic situation in the United States was a taboo subject for the financial markets. There was an unwritten agreement that the U.S. was to maintain its credit rating - not because it's reliable, but because downgrading its debt could trigger another collapse of the global economy."

 

By Alfred Adamiec

                                

 

Translated By Ewelina Kabat

 

April 18, 2011

 

Poland - Gazeta Wyborcza - Original Article (Polish)

The credit rating agency Standard & Poor’s (S&P) just lowered the outlook for U.S. credit from stable to negative - which is a very subtle warning. However, according to Alfred Adamiec of Alfa brokerage, if economists wanted to be completely honest with themselves, they would have lowered America's credit rating, not just its credit outlook.

 

Up to now, the economic situation in the United States has been a taboo subject for financial markets. There has been an unwritten agreement that the U.S. was to maintain its credit rating - not because it is reliable, but because downgrading its debt could trigger another collapse of the global economy.     

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If economists wanted to be honest, they wouldn't just lower America's credit outlook, but its actual credit rating. This fear of making too frank an assessment of the debt of the world's largest economy demonstrates that the global financial system has yet to recover from the crisis.

 

Nevertheless, in many countries, increasingly honest comments are being heard. First of all, PIMCO Investment Fund (one of the largest in the world), has already admitted to having sold all of its U.S. bonds. Secondly, China's credit rating agencies have been saying for quite some time that the credibility of the United States is overrated.

 

VIDEO: Standard & Poor's seeks to force solution to U.S.

debt crisis.

[Click here or click photo to watch]

 

The main source of the problem is the quarrel between Republicans and the Democrats. Each party has divergent notions about how to rescue the American budget. The Republicans want to cut social spending and taxes in order to get the economy moving, while Democrats would rather raise taxes and the national debt limit. It's clear that within the next few weeks, without action, the U.S. debt limit will be breached. If that happened, it would mean de facto that the United States is bankrupt. On the other hand, the mere raising of the limit won't mean much, because what's important to economists are the numbers. If there is a growing debt, no changing of "limits" will ever address it.

 

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[Posted by WORLDMEETS.US April 23, 8:29pm]

 







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