Budget Stalemate Puts America’s Credit Rating at Risk

Tagged in:

This just in: Credit rating agency Fitch has revised the outlook for the U.S.A.’s AAA credit rating to negative from stable.

Do you have faith in our elected officials to reach a deal to prevent us from defaulting on our debt?

The news comes just as the latest talks in Washington, D.C. over how to raise the debt ceiling and end the government shutdown seem to be falling apart.

“The prolonged negotiations over raising the debt ceiling (following the episode in August 2011) risks undermining confidence in the role of the U.S. dollar as the preeminent global reserve currency, by casting doubt over the full faith and credit of the U.S. This “faith” is a key reason why the U.S. ‘AAA’ rating can tolerate a substantially higher level of public debt than other ‘AAA’ sovereigns.”

If a deal is not reached, Fitch threatens to downgrade the US to a ‘B+’ from ‘AAA.’ In the event a deal is reached, the USA will continue to be on watch, with Fitch taking into account “the manner and duration of the agreement and the perceived risk of a similar episode occurring in the future.”

Photo Credit: Momar FR