Tuesday, August 9, 2011

Understanding the U.S. Credit Rating downgrade

Credit rating agency Standard & Poor's (S & P) lowered the U.S. AAA rating for the first time since granting it in 1917. It means that now the greatest global economy has no more the position of one of the most reliable countries to lend money to . The announcement of the lowering, from AAA to AA + (pronounced AA plus), took off the United States from the small group of 14 countries whose debts are given the highest score of the three major credit agencies in the world.
the lowering of the U.S. credit rating
from AAA to AA +

These agencies consider the capacity of the country to honor its debts and serve as parameters to guide investors around the world. The AAA rating means a risk almost null that the debt is not paid, therefore safer for investors. Because of this security, the U.S. always could borrow funds at a lower rate on the international market.

But now, the U.S. Treasury is classified under countries like UK, Germany, France, the Netherlands, Australia and Denmark - which remain in the select list of the safest ones. The American Treasury refuted the decision of the S & P and tried to avoid it, arguing that there was error in the analysis of American accounts.
In a statement, S & P said the downgrade reflects the package of fiscal measures discussed by Congress last week.
But there is a chance that the decision does not have a strong impact, since the other two major rating agencies have not lowered U. S. credit ranting. In general, funds that invest only in AAA roles require that they receive the classification for at least two of the three agencies.

Impacts on Brazil’s economy
The President Rousseff said on Friday (Aug 5th) that Brazil has more conditions now to face the current international economic crisis than it had at the time of the 2008 crisis. The President highlighted as a way to combat the crisis effects, Brazil's international reserves and compulsories reserve.

Read more:

Do you think that the lowered American credit rating can affect the Brazilian economy? 
Do you agree with the President Dilma’s declaration that Brazil is more prepared to face the crisis than before? 
Take part of our discussion, we are eager to hear from you.

Journalist and Barone English´s press agent

by Waldirene Biernath

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