Monday, April 18, 2011

S&P Cuts Outlook on U.S. Debt to Negative

Standard & Poor's on Monday downgraded the outlook for the United States to negative.

S&P said the move signals there's at least a one-in-three likelihood that it could lower its long-term rating on the United States within two years.

"Because the U.S. has, relative to its 'AAA' peers, what we consider to be very large budget deficits and rising government indebtedness and the path to addressing these is not clear to us, we have revised our outlook on the long-term rating to negative from stable," the agency said in a statement.

This is likely the beginning of many warnings (and eventually cuts) by the ratings agencies. There is no way the U.S. government will be able to meet its debt obligations without many trillions in immediate cuts (not in 10 year plans) or huge Federal Reserve money printing, which, of course, will result in tremendous price inflation.

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