Regardless of the outcome of the political debt limit dance taking place in Washington, the USA AAA bond rating is going to be going away!
While the Washington version of Ringling Brothers Barnum and Bailey Circus drones on, it is most likely a foregone conclusion that the USA AAA will be fading away into the sunset.
Why then you may ask, if partisan politics are overcome, the debt ceiling is raised and there is no U.S. default, would the USA AAA be lost?
It comes down to two words repeated three times: Government spending, government spending, government spending!
In the book, "This time is different" the authors looked at the past 200 years of global economic history and found that when a country's outstanding sovereign debt is above 90% of that country's GDP, nothing good happens to that country's economy.
Some members of the over 90% debt to GDP club
Japan: 230% AA-
Greece: 125% Ca
Italy: 120% A+
USA: 97% AAA?
USA ratings bottom-line?
Coming to some consensus on what will be an inadequate compromise bill that allows the debt ceiling to be raised while making no real attempts to cut spending or federal deficits in any real way will NOT preserve anything, other than potentially saving the jobs of some members of Congress.
The economic lives and the quality of life for Americans now and into the future hangs in the balance while one of the most disgusting displays of partisan politics that I can remember is being played out in Washington.
Watch, take names and remember in November of 2012!
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