Markets around the globe have suffered huge falls this week. Credit ratings agency Standard and Poor’s said early on Saturday it had downgraded the US from its top AAA rating to AA+. This means American government debt is no longer one of the world’s safest investments!
While the move has been anticipated by markets since last week’s deal in Washington agreed a cut of only $2.5trillion in the deficit, it’s unclear how markets will react when they open on Monday. The loss of the top-notch rating may cause panic on the markets with traders fearing the world’s biggest economy may be heading back to recession.
In an interview, Warren Buffett told the FOX Business Network that the US is still in triple A rating.
In fact, the US debt default is unlikely. The US owes no money in currency other than the US dollar. The US government can print any amount of currency notes at will to repay its obligations at any one time.
According to Buffett, “I don’t get it. It doesn’t make sense. In Obama, the U.S. is still Triple-A rated and if there were a Quadruple-A I’d give the U.S. that.”
By the way, the US’s debt is still rated AAA by Moody’s and Fitch, the two other largest agencies.