If U.S. defaults, a debt rating on par with Zambia’s

[brooklynite]

Source: Crain's New York Business

If the U.S. government defaulted, Fitch Ratings warned Monday that it would slash the credit rating of its debt securities to B+. It’s a shattering 13-step drop that puts Uncle Sam’s creditworthiness on par with Mongolia’s or Zambia’s.

The warning, coming from the smallest of the major credit-rating agencies, is the starkest yet on what a default could mean if Congress and the White House are unable to negotiate an agreement to increase the nation’s borrowing capacity.

Fitch said the downgrade would take place on Aug. 4, two days after the deadline passes for Congress and the Obama administration to reach a deal on raising the debt limit. On Aug. 4, a $90 billion Treasury bill is to mature, and if holders are not repaid in full, the security would be downgraded to B+ from AAA. Fitch said the lower rating is the highest it confers on defaulted securities where investors can reasonably expect to ultimately get paid all or most of what they’re owed.

If the default persisted, Fitch said it would lower all other Treasury securities to B+ from their current rock-solid AAA rating. A B+ credit rating is deep junk—six notches lower than the lowest investment-grade rating of BBB-. Fitch hinted that a AAA rating would not be restored after the default was “cured,” saying the new rating would be line with the company’s assessment of the U.S. government’s creditworthiness going forward. It added that it believes a default is “highly unlikely.”



Read more: http://mycrains.crainsnewyork.com/blogs/in-the-markets/2011/07/if-u-s-defaults-a-debt-rating-on-par-with-zambias/

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Hmm, large Christian population, no economic safety net, low taxation...sounds like a perfect match for the Tea Party crowd.

[titaniumsalute]

1. The United States of Failure

Thanks Republicans. The Grand Old Party will take us into the new dark ages. Can't wait.

[Psephos]

2. With $60 trillion or more in unfunded future liabilities, that's about where it belongs. n/t

[damntexdem]

3. It doesn't matter where it will be specifically (well, it will to financial markets).

The important thing is that FOR THE FIRST TIME IN ITS EXISTENCE the U.S. will have defaulted. After the Revolutionary War, a very-weak government not only didn't default, it assumed the debts of the 13 former colonies/now states and finally paid them off. If the U.S. defaults now, it will never regain its reputation in this area -- one of the few where it still has a good rep.