Remember how government bonds have been considered a sure investment because they are backed by “the full faith and credit” of the United States of America? Well, the Standard & Poor bond rating agency is having its doubts about what our government’s “full faith and credit” is worth:
S&P changed its outlook on the United States from “stable” to “negative” and said the federal government could lose its AAA rating if officials fail to bring spending in line with revenues.
The AAA rating identifies the United States as one of the world’s safest investments — and that has helped the nation to borrow at extraordinarily cheap rates to finance its government operations including two wars and an expensive social safety net for retirees.
Stock prices fell nearly 2 percent in the hours after the report’s release, before ending the day down about 1 percent. The dollar and Treasury bond also slid in the wake of the report, but recovered by the end of the day.