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US debt warning shocks markets
The power of rating agencies was emphasised yesterday as Standard & Poor issues a warning that the credit rating on US Government debt, currently standing at the highest level at AAA, could be cut if the US debt pile is not reduced.
Post Date: April 19th, 2011
The US and European markets fell substantially on this news, already worried about Greece, Ireland, Portugal and possibly Spain as far as debt goes in the Eurozone.
The US funds it's borrowing requirements through the issuance of long term bonds and any downgrade in the quality of their credit rating, will lead to higher borrowing costs and the US deficit will get worse.
Why is this a problem when Obama has submitted a Budget only last week, that will reduce the US budget deficit by US 6.2 trillion ?
Because it is not expected to be passed through the Democrat led senate.
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Post Date: April 19th, 2011
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