What happens if the USA lose's its Triple A Rating (Death spiral financing)

[Ahovking]

Here is what i believe will would happen if the USA loses its Triple A Rating

Death spiral financing
The U.S.A prints money to pay their debt everyone knows this, That's why they have a 14 trillion dollar debt. The U.S.A needed to cut 4 trillion dollars for the USA to avoid a downgrading, but now with a deal only to cut 1 trillion dollars, a downgrading should follow as it shows the USA government inability to control their debt. the USA will find it harder and harder sell its debt as pleople know the U.SA will find it more and more harder to pay back the debt and to pay thay must print and borrow more and more money which devaluation the U.S. dollar to make sure countries contunie to buy and lend the USA money they will have to offer more debt for less. this continue until the USA is downgraded again and again resulting in a Death spiral financing, Looking though the past HOW has the USA pay for its bills and debt in the past.......by making more debt by printing and borrowing, that why thay have a 14 trillion debt.

Summery
because the USA try to spend its way out of just about everything and isn't good at cutting spending at all the risk of a Death spiral financing is very high.

Now im only guessing so what do u think im i right im i wrong what do u think might happen if the us does lose its Tripple A Rating ?

 

[Snorrius]

It is obvious for any sane person that US bonds are not really AAA but more close to BAA. If Big Three were "honest" they would degrade US rating long ago but it is hard to blame them: US' AAA is a kind of symbol - not only of US economy but of the world one. It is like holy glass chalice which did not really have any inherent value but helps people to keep their faith. If it is broken than people will forfeit their faith and accept the truth and this is a very hard step to make.

Compare it with Muslim's Kaaba. By itself it is just cube-shaped granite structure - but for millions and millions of Muslims it is a symbol of faith, the sign of Allah. If someone was to destroy it - it may lead to great unrest, disorder and riots.

Bit Three do not want to be faith destoyers, so they try to avoid the day of downgrade as long as possible.

 

[Cutlass]

The U.S.A prints money to pay their debt everyone knows this, That's why they have a 14 trillion dollar debt. The U.S.A needed to cut 4 trillion dollars for the USA to avoid a downgrading, but now with a deal only to cut 1 trillion dollars, a downgrading should follow as it shows the USA government inability to control their debt. the USA will find it harder and harder sell its debt as pleople know the U.SA will find it more and more harder to pay back the debt and to pay thay must print and borrow more and more money which devaluation the U.S. dollar to make sure countries contunie to buy and lend the USA money they will have to offer more debt for less. this continue until the USA is downgraded again and again resulting in a Death spiral financing, Looking though the past HOW has the USA pay for its bills and debt in the past.......by making more debt by printing and borrowing, that why thay have a 14 trillion debt.

This statement is fundamentally wrong. The debt has nothing to do with "printing money". It has to do with spending more than taxing.


The AAA rating is about the risk that bondholders will get their money back and interest payments. And that's all. As long as that is certain to happen, then AAA should stay.

 

[Virote_Considon]

If the USA cuts the Triple A, then there would be a resurgence in * insurgents.

(*Communist)

 

[kochman]

Now im only guessing so what do u think im i right im i wrong what do u think might happen if the us does lose its Tripple A Rating ?

One thing that happens immediately, we borrow at a 1% higher interest rate. I saw some numbers, and I think that would make our current payments $180 billion/year... That's not something we need to be adding into the budget when we are already over $1.5T in deficit/year!!!

 

[GoodGame]

What Cutlass said. You should expect domestic USA interest rates to increase (e.g. loans/credit). That will probably lead to some slowing of the economic recovery, partially trickled down slowing of sales of big ticket items like cars, houses, etc... and also people being adverse to expanding/starting businesses due to higher borrowing rates.

 

[RedRalph]

How likely is it that the US will lose this rating?

 

[Cutlass]

More likely now. The Republicans managed to force a bill that doesn't really address the long term budget problems, but will weaken the economy. Thanks, Republicans, the US now has a worse long term situation than it would have had had you just sit down and STFU!

 

[kochman]

Because the alternative, unfettered spending, was so much less likely to cause a downgrade?

 

[pi-r8]

Credit rating agencies don't actually set the interest rate. When Japan was downgraded, it's interest rate didn't change. Investors will keep loaning us money regardless of what some analyst at Moody's says, because there's just nowhere else for that money to go right now. We're at historically low interest rates right now, and there's no reason that should change.

 

[kochman]

Credit rating agencies don't actually set the interest rate. When Japan was downgraded, it's interest rate didn't change. Investors will keep loaning us money regardless of what some analyst at Moody's says, because there's just nowhere else for that money to go right now. We're at historically low interest rates right now, and there's no reason that should change.

Nonsense.
Historically low interest rates, as set by the US Gov... yes. That can't, and won't last forever.

However, that is not necessarily the rate that other countries will loan to the US.

If we get downgraded, our interest rate for international loans WILL go up. Stop spreading incorrect ideas to downplay it...

 

[pi-r8]

Nonsense.
Historically low interest rates, as set by the US Gov... yes. That can't, and won't last forever.

However, that is not necessarily the rate that other countries will loan to the US.

If we get downgraded, our interest rate for international loans WILL go up. Stop spreading incorrect ideas to downplay it...

because...? You should try and give some sort of logic to back up you're saying, instead of just bluntly declaring "I'm right, you're wrong, shut up."

 

[kochman]

because...? You should try and give some sort of logic to back up you're saying, instead of just bluntly declaring "I'm right, you're wrong, shut up."

Ok, when you have a lower credit rating, you are loaned money at a higher interest rate. You really need sources for this? Ask Greece, Portugal, Argentina, etc, etc, etc.

 

[Cutlass]

Because the alternative, unfettered spending, was so much less likely to cause a downgrade?

We don't have unfettered spending. Most of it is necessary. And where it is an issue, no one is really trying to look at that.

No debt reduction plan is a serious one without revenue. So Wall St knows that this plan is useless crap.

 

[GoodGame]

How likely is it that the US will lose this rating?

NEW YORK (CNNMoney) -- Credit rating agency Moody's said Tuesday the United States will keep its sterling AAA credit rating for the time being, but lowered its outlook on U.S. debt to "negative."