albert
05-28-2009, 05:56 PM
Credit ratings agency Standard & Poor’s effectively threatened to take away UK's AAA-credit rating. It downgraded the outlook for the UK from “stable” to “negative”, citing concerns about soaring public debt.
It is a warning at the moment and there's probably no need to panic. However, if public debt eclipses annual production, there may be reason to worry. It is what led to Canada and Japan losing their AAA ratings. What is interesting to note is that the warning to UK seems to have ramifications in the US. GBP seemed to have sold off sharply against the US Dollar when the news first came out, but it actually ended that day slightly higher.
But for how much longer? What would a downgrade actually mean for the rest of us (Pension Funds, Shares etc.)? Are investors more wary of UK investments or are they worrying that US may go the same way? Is it inevitable that the US dollar will lose its status as the reserve currency?
It is a warning at the moment and there's probably no need to panic. However, if public debt eclipses annual production, there may be reason to worry. It is what led to Canada and Japan losing their AAA ratings. What is interesting to note is that the warning to UK seems to have ramifications in the US. GBP seemed to have sold off sharply against the US Dollar when the news first came out, but it actually ended that day slightly higher.
But for how much longer? What would a downgrade actually mean for the rest of us (Pension Funds, Shares etc.)? Are investors more wary of UK investments or are they worrying that US may go the same way? Is it inevitable that the US dollar will lose its status as the reserve currency?