Heidi Moore: They downgraded the U.S. credit rating. It's like cutting our credit score. We went from a AAA to a AA+ -- which is more than people expected; people thought we'd just be a AA. The importance of this is largely psychological -- we've always been a AAA country. But now that we are a AA+, that's what everyone else will be too. I think everyone else will follow us.
Carney agreed that other countries would be downgraded as well:
John Carney: Remember, we're the country that supports people when they get in trouble. If our credit rating is lower, so is everybody else's.
Comments, observations and thoughts from two bloggers on applied statistics, higher education and epidemiology. Joseph is an associate professor. Mark is a professional statistician and former math teacher.
Friday, August 5, 2011
If America's not AAA, is anybody?
I don't mean that in a jingoistic way; I'm simply wondering where the safe harbors are in the aftermath of a US default. The people at Marketplace (which has been doing some great work lately) have been thinking along the same lines:
I disagree.
ReplyDeleteSweden has a AAA rating and the US seems to dislike then on principal due to their history of neutrality and the welfare state. Both Canada and the UK are AAA; neither had been bailed out by the US post-WWII (and, even then, the UK paid back a surprising fraction of war debt).
The countries at risk are those that the US historically supports financially (like the EURO-zone) which should be getting it's own downgrade for a host of reasons.
But conditional on the world economy existing (and the US is no longer big enough to be the world economy), you can be likely to pay bonds or not. But the US refusal to raise revenue (a sad state of affairs for which we are all responsible) does change its long term risk.