A new concern in the current US economic crisis is the credit rating of the United States.The fact that questions about the US credit rating is enough cause for concern. The strength of the dollar backed by the “faith and credit” of the US government has guaranteed low interest rates for government borrowing and provided a perception of safe investment for everyone.
UPDATE: As I was writing this post the bond markets underwent the worst adjustment I have seen with bond prices dropping, pushing mortgage rates up drastically. Best I can see, at issue are concerns over the US credit rating and heavy borrowing.
This confidence is now in question. To the point that the Treasury Secretary felt required to address the question, the reality of the issue is apparent. Pressing concerns even further is that the United Kingdom credit rating seems to be close to a downgrade with S&P’s decision last week to drop their outlook on Great Britain from stable to negative.
The dollar is facing renewed challenges as the global currency. While this is not new, the matter is getting new play, especially from China.
The rapid expansion of the US debt is the primary concern of debt markets. The growing foreclosure problem compounded with what appears to be permanent job losses especially in the automotive industry add to concerns over the US credit rating.
The immediate impact though is upward pressure on bond market rates, including mortgage back bonds. This is leading directly to increases in mortgage rates, despite the best efforts of the Federal Reserve to target rates below 5%.
At present the credit rating is AAA. Is there cause for concern?
Richard, You can bet there's cause for concern. We are drownmg in debt. I sure wish I knew where all of this is going to lead.
I've wondered about this AAA credit rating for awhile. I just don't how its possible for us to remain at this rating with so much debt. It seems like a joke in my opinion.