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Ratings Agencies Backing Away from a Downgrade? Will It Really Matter Either Way?

John on August 4, 2011 at 2:05 am

Maybe you’ve seen articles saying that the ratings agencies were likely to downgrade America’s debt whether or not an agreement was reached on raising the debt ceiling. I’ve seen several pieces that led me to believe a downgrade was all but inevitable.

That may still be the case, but there is some reason to think the ratings agencies may be hesitant to downgrade the US. First, the head of S&P claimed his analysts were misquoted about the necessity of a $4 trillion deal. In the clip below (about 2 1/2 minutes) he suggests that while a $4 trillion deal would have preserved the triple-A, it’s possible that something less would as well:

But in case you’re tempted to breathe a little sigh of relief and assume it’ll all be okay, listen to this sobering assessment from investors Jim Rogers who has moved to Singapore so his children can grow up speaking Mandarin:

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Update: No sooner do I publish this than I see Ace’s post suggesting Moody’s is serious about a downgrade. I guess we’ll see how serious.

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Category: Energy & Economy |

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