Standard & Poorer to Downgrade U.S. Rating If Debt Ceiling Not Fixed By August 4th

The debt ceiling has been hanging over the United States economy for months. Now Standard & Poorer is reporting it will downgrade the U.S. rating if the debt ceiling isn’t lifted by August 4th.

Debt Ceiling

The debt ceiling is, of course, the maximum amount Congress can borrow to run the government. We currently are at the ceiling and living off of tax revenues built up recently. These revenues will run out in early August and nobody is sure what will happen then.

The good news is Congress can simply raise the debt ceiling if it likes. With the national debt picture being so gruesome, Republicans are staking their political lives on getting massive spending cuts before they will agree to raise the ceiling. It is the ultimate game of chess because defaulting on our obligations would lead to financial chaos.

S&P Rating

Standard & Poorer is a rating agency. It is now stating that it will drop the rating for U.S. treasury notes from the current triple A level to “D” on August 4th if the debt ceiling issue isn’t resolved. This would be an unmitigated disaster for the fledgling United States economy.

The first problem is interest rates would go through the roof. Why? The United States would have to offer much higher rates than it currently does to get investors interested in such sketchy notes. This would translate into higher interest rates across the board for loans and such in the country. Between credit card debts, car loans and home mortgages, this would push tens of millions of Americans in to bankruptcy. Basically we would be talking about a second Great Depression.

Politicians

So, our future seems to ride on whether a collection of ego maniacs in Washington can come to some kind of a deal on the debt ceiling. Given there is an election roughly a year and a half away, one can image a deal will be struck. Then we’ll revisit the problem in another two years.

This is how a heavy debt load can take down a country.

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