If a Downgrade Occurs, What Will Happen?

By: Rebecca Figone

When the stock market crash of 1929 occurred, it hit the papers with a furry, in order to get the news out of the occurrence.  Right now in America, our circumstances, again look bleak.  Moody’s, Standard & Poors, and Services and Fitch are all threatening to downgrade our credit rating. We have nations throughout the world calling for the dollar to stop being the dominate world currency.  We are in a place now, that is actually worse than the situation leading up to what happened just prior to the Great Depression.  Part of what makes it worse, is just sheer population and the sheer amount of our current national debt.  More people will be effected by this fallout in the end, than what happened in 1929.

According to Fox Business:

The once-unthinkable is now looking more like all-but-inevitable: the United States is probably going to lose its top-notch credit rating.

And make no mistake: the economic impact should the country be stripped of its coveted triple-A rating will be swift and severe. Stocks and bonds will likely tumble and interest rates will jump higher.

There will be no lag time between the downgrade announcement and when the shock waves begin to be felt.

“It starts instantaneously,” said Greg McBride, senior financial analyst at Bankrate.com. “You won’t be able to grab a cup of coffee before the selloff gets underway.”

All of the big three credit rating firms – Standard & Poor’s, Moody’s Investor Services and Fitch – are threatening to downgrade U.S. debt if Congress fails to address the massive debt load and budget deficits that imperil this country’s long-term financial stability.

With the bickering in Washington, D.C., reaching a fever pitch this week there is growing sentiment that a downgrade is imminent.

Initially, the ratings firms tied their threats to the growing potential for a government default if the U.S. debt limit isn’t raised by Aug. 2. But the endless arguing and seeming lack of direction among political leaders is widely believed to have increased the chances for a downgrade, separate from the risk of default.

McBride said the broad ripple effect would be felt immediately. “It would unsettle financial markets and it won’t be limited to bonds markets,” he said.

Please see this link to read the rest of this article at Fox Business.

 

The situation is not improving, and ultimately what is inevitable is: America will have to pay her debts. If our markets crash, ultimately it will have a chain reaction. If investors abandon us, we are in deep trouble. In order to pay our debts, Americans will have to convince their leadership to spend less, so that the monies we have can be applied toward the huge debts that have been incurred. Our politicians don’t want to cut spending, especially like must be done, in order to dig our way out of this chasm of debt. Ultimately, if we do not do it and do it soon, the next generations will suffer and their standards of living will be lower than ours by far. May cool heads and wise decisions prevail. I am willing to suffer now, to ensure that our children and grandchildren are better off. I am sure that most Americans feel that way, if they care about their offspring, at all.

What will happen? That remains to be seen. Be Blessed.

This \\\\ © 2011

Acknowledgements: Fox Business

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Tags: 1929, Fox Business, Moody's, Services & Fitch, Standard & Poors, Stock Market Crash