U.S. Credit Outlook Downgraded: Old News in ONE Day?
Scarce News Coverage Won't Slow the Fast Changes to Come
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| By James B. Driscoll | ||
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"...we now believe that [U.S. economic strength] might not fully offset the credit risks over the next two years at the ‘AAA’ level.” ~ Standard & Poor's (4/18)
You probably heard that Standard & Poor's downgraded the U.S. credit outlook. The financial press duly reported the April 18 announcement. The downgrade means S&P sees a one-in-three chance that the U.S. credit rating will fall below AAA within the next two years. That sounds like big news. But, just one day after the downgrade, the absence of stories on the subject was conspicuous.
At midday on April 19, the front page of a popular financial website didn't include the credit outlook downgrade among its top 7 stories. Another well-known financial website listed the downgrade story in fourth place on the side of the front page, but absent from the center row story list.
Earlier that next day I did see a financial website article about the downgrade, but the title had a quote saying that earnings trumped the downgrade announcement.
Is the national financial psyche numb to the nation's debt crisis?
Many astute historians and economists have for years warned of the dangers of America's debt and deficit. And politicians have kicked the can down the road the whole time.
But now, a major credit rating agency just downgraded the credit outlook for the United States of America.
And the silence is deafening.
EWI's Robert Prechter knows what it means when people choose not to "lend an ear." He's long warned about the nation's credit build-up, and of a day of reckoning:
"In the United States, default could happen to municipal bonds at any time after times get difficult. Politicians in many jurisdictions have borrowed and spent way more money than is likely ever to be paid back. Merely paying the interest on that debt in tough economic times will become an acute problem for many issuers. In such cases, default for many cities and counties will be inevitable. Even the debt of some higher-level government agencies is at serious risk of default in a worst-case scenario."
Time alone will tell if America's credit outlook downgrade will turn into an actual credit rating downgrade.
