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SandP Downgrades U.S. Credit Rating

Release Date: 
Friday, August 5, 2011

For the first time in history, the United States' credit rating was downgraded from its top AAA rating by Standard & Poor's reducing America's rating to AA+.  The Wall Street Journal reports that S&P concluded the United States' finances no longer justified the AAA rating.

"S&P said "the downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics.' It also blamed the weakened "effectiveness, stability, and predictability" of U.S. policy making and political institutions at a time when challenges are mounting."

It was reported that the United States may take years before it can regain its AAA rating.  More immediately, investors may be required to sell off assets to provide additional collateral to lenders who no longer consider United States Treasuries to be "high quality."

"In a worst case scenario, credit markets could seize up, as they did during the Lehman Crisis... If Treasurys tumble in value, funds will be forced to mark down their holdings, raising the potential for some to 'break the buck' as the Reserve Primary fund did during the worst of the financial crisis."

Goldline will be open on Saturday between 7AM and 3PM to assist clients interested in acquiring precious metals.  To acquire precious metals or learn more, call Goldline at 1-866-867-4466.

(Source:  "S&P Downgrades U.S. Debt for First Time," WSJ, August 5, 2011)

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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