What does it all mean?
Standar and Poor’s recent decision to downgrade the US credit rating for the first time in history, may have dramatic effects, or little to no effect at all. The latter least likely to happen as gold soared over $1,700 during overnight trading coming in to the first week after the downgrade.
The most relevant seven hours in history took place saturday, August 6th, 2011. From 1pm to 8pm, a back and forth dialouge was under way between S&P and the Federal Reserve. S&P notified the Fed of the downgrade and the Fed notified the S&P of a mistake in the calculations used. S&P acknowledges the mistake, and the Fed points out a second mistake that was made. S&P notifies everyone that they are going to go ahead with the downgrade in spite of the mistakes that were made.
A little irresponsible according to some, maybe a point was made to the so called leaders in Washington that they can not do whatever they feel they want anymore and will be held accountable for their actions.
You can read the official overview from S&P here;
Something interesting within that report that caught our attention….
“The transfer and convertibility (T&C) assesment of the U.S. –our assesment of the likelihood of official interference in the ability of U.S.-based public- and private-sector issuers to secure foreign exchange for debt service – – remains ‘AAA’ ”
Interpretations of the above are welcomed to those that would like to share.
If your a hardworking American citizen that does not quite grasp the magnitude of what has happened, just imagine all your interest rates on your current debt with all credit cards, vehicles, mortgage etc.. were raised a point. What would that do to your monthly bills? And your life or business functioned by borrowing every month, and everything borrowed from this point on has a higher interest rate… would you still be able to survive?
There will be much more concerning the effects of the credit downgrade to come as the markets react and show just what they think of the action.