At last the Rubicon has been crossed. Standard & Poor's has downgraded the American sovereign long term rating from AAA to AA+ and as if to add insult to injury has placed the rating in negative watch ( sorry, it is not negative watch; it is negative outlook : corrected after seeing the comment below) which means further downgrading is not ruled out. China which is rated two notches below i.e. AA- has advised the American government to give up its addiction to debt and to learn to live within means. China, a communist country wants America, a capitalist nation to trim its bloated "social welfare" expenses. It is difficult to come across a greater irony.
Has S&P jumped the gun in an attempt to undo the damage that resulted from its inability to foresee the subprime crisis? In case this interpretation is correct, we need to appreciate that two wrongs do not make a right.
Moody's and Fitch have not downgraded America for the present. Is S&P trying to prove its leadership among ratings companies once again?
Whatever be the reason for this epochal decision, members of American treasury and Congress have only betrayed their boorishness by criticising S&P for its weighty decision. At present India is rated BBB- and any downgrade will mean slippage into speculative zone with all its attendant negative consequences. You can trust our politicians to test that possibility any time soon.
2 comments:
The rating is AAplus with negative outlook and not under negative watch.
Thanks for your comment. The post is now corrected.
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