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US likely to be downgraded again: Merrill Lynch

(People's Daily Online)

08:23, October 24, 2011

Either Moody’ or Fitch could downgrade the Untied States by the end of 2011 on concerns over the rising U.S. national deficit, Bank of America Merrill Lynch said in a recent report.

If the U.S. Congress fails to approve on a credible long-term plan to reduce the deficit, which is surging towards a historical 15 trillion probably in 2012, the triple A rating of the Untied States could be downgraded by either Moody’ or Fitch, following the downgrade by the Standard & Poor’s in August.

A second loss of the country's top credit rating would be an additional blow to the sluggish U.S. economy, Merrill Lynch said.

"The credit rating agencies have strongly suggested that further rating cuts are likely if Congress does not come up with a credible long-run plan" to cut the deficit, Merrill's North American economist, Ethan Harris, wrote in the report.

Agreed by Democrats and Republicans, a bipartisan congressional committee -- known as the "super committee" -- was formed in September to address the deficit. It needs to break an impasse between the two political parties in order to reach a deal to reduce the U.S. deficit by $1.2 trillion by November 23, a dateline they have agreed on.

If a majority of the 12-member committee fails to agree on a plan, $1.2 trillion in automatic spending cuts will be triggered, beginning in 2013. The automatic cuts would weigh further on a fragile U.S. economy, Merrill said.

In the same report, the investment bank reduced its 2012 and 2013 growth forecasts for the United States to 1.8 percent and 1.4 percent, respectively.

Moody's Investors Service, which has a negative outlook on the United States's Aaa rating, said it is looking at several other factors, including the results of presidential elections and the expiration of the Bush-era tax cuts late in 2012, to decide on the rating.


Leave your comment6 comments

  1. Name

Pan Asian at 2011-10-26220.255.2.*
Good job, Uncle Sam! Continue to print more money like a madman (QE) to finance your war machines in waging wars across the globe. Obama should get his second peace prize for deploying combat troops in Africa feigning humanitarian missions again.
PD User at 2011-10-2558.68.145.*
damn it, U.S. bonds...
Canada at 2011-10-2570.36.49.*
The U.S. is looking at ways to make the rest of the world pay to cut its deficit. Today the U.S. government announced that every Canadian citizen will have to pay $5.50 each time they cross the border to visit the U.S. There is a lot of consumer cross border shopping because even when the Canadian dollar is higher than the U.S. dollar, prices are cheaper in the U.S.
wende at 2011-10-2471.125.85.*
remember that these rating companies reside in the US and they will be more than lenient with the ratings on US. The saying goes "one does not bite the hand that feeds it". One should not take the ratings on the US at face value.
helen at 2011-10-2460.51.30.*
The US rating agencies should have downgraded the United States long time ago and the rating now for the US cannot, under rational and normal circumstances, be better than those for Greece, Egypt, Uganda, Congo ...But then again, US rating agencies are racist and discriminatory by tradition against all other sovereign nations and remain the tools of US politics!A CCC negative would be most appropriate for the US ...

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