Market meltdown: Now US loses its triple A credit rating

6th August 2011

The Guardian reported that the move could also "severely undermine the recovery of the world's largest economy and prompt further calamitous falls on world stock markets next week".

The downgrade follows a standoff between the Republicans, Democrats over the US's borrowing requirements, the deadlock was broken on Tuesday when Congress agreed to lift the limit and thereby avoiding default.

The Guardian also reports that China, the world's largest holder of US debt,had been unhappy with the wrangling and would be demanding  "the United States address its structural debt problems and ensure the safety of China's dollar assets".

Mindful Money's economist blogger Shaun Richards writes that while S&P's decision was signficant it should not have come as a surprise.

"Any rational investor will have been aware of the fact that the creditworthiness of the United States has been declining in recent times. That reality is unchanged and accordingly you can argue that there is nothing new here."  

The Wall Street Journal was quick to ask its readers whether they agreed with S&P's decision.

Pat Galbraith was one of many who disagreed:  "All sovereign democracies should throw the ratings bozos out, if they insist on rating the country's debt obligations. It's none of their business. That's what the voters are for.

We've been here before – during the Articles of Confederation, the real First National Bank, the Second National Bank put to trash by Jackson and since 1913 with a much more sofisticated version of the first two. Each time same same. Just slower this time.

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