Verge of Collapsing

Beatrix Lumanog Garcia # 8

IV - Charity English

Verge of Collapsing

“Ever since 1917, the credit rating given to the United States of America has always been the highest possible one.” (CNN) This statement held true all these years until Standard and Poor’s lowered their credit rating by one level last August 2011. With this shift of rating from the norm, there was an uproar of opinions from different points of view.

Standard and Poor’s, one of the prominent credit rating firms in the world, said “The downgrade reflects our opinion that the fiscal consolidation plan that the Congress and the Administration recently agreed to fall short of what, in our view, would be necessary to stabilize the government’s medium term debt dynamics.”.

Moody’s Investors Service and Fitch Ratings, the other two renowned credit rating firms, affirmed their AAA credit rating, the highest possible credit rating given to a nation, on the United States last August 2 2011. The also released the statement, “Downgrading is possible if lawmakers fail to enact debt reduction measures and the economy weakens.” shortly after.

JPMorgan Chase and Co., another leading firm in the worldwide economy, said “S&P’s action may hurt the US economy over time by increasing the cost of mortgages, auto loans and other types of lending tied to the interest rates paid on Treasuries.”. In relation to this, the firm estimated that the downgrade would raise the nation’s borrowing costs by 100 billion USD a year.

Mohamed El-Erian, a chief executive of Pacific Investment Management Co, in an interview with a Bloomberg anchor said “The minute you start downgrading away from AAA, you take small steps toward credit risk and that is something any country would like to avoid.”.

With these opinions from big players in the worldwide economy and the mention of “debt dynamics”, “reduction measures”, “interest...