A Second Downgrade For US Debt Comes With No Real Solution In Sight

Friday, April 06, 2012 11:26
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A Second Downgrade For US Debt Comes With No Real Solution In Sight

Tags: Economic Outlook | U.S. credit rating | U.S. debt

US debt has been downgraded a second time by a small agency called Egan-Jones. Egan-Jones actually downgraded US debt from AAA to AA+ in July before Standard & Poors made its first downgrade the next month.

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The downgrade was made because, for the first time, US debt has exceeded GDP and it looks like there will be no reversal any time soon. The agency has predicted the US debt ratio will be 106% by the end of 2012. It has cited this level as an inflection point and blames the political standoff in Congress as a significant reason no solution has been found for mitigating the worsening debt issue.
 
The prediction of a US debt level of $16.7 trillion compared to a GDP of $15.7 trillion is the basis for the 106% projection. The longer debt is an issue for the US, the longer it will take for its good credit ratings to be restored.

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