The U.S. dollar is still the safest bet around even a year after Standard & Poor’s downgraded the U.S. government rating from AAA. A day after the announcement, the Dow dropped 635 points. Now, yields on 10-year Treasury notes are down to 1.57% from 2.58%, the Dow is up more than 1,600 points, the dollar is up 6% compared to its major trading partners, and gold prices are down 3%. S&P’s fear that the U.S. could not come up with a plan to reduce its debt was cited for the downgrade. And there still isn’t a plan one year later. The White House and congressional Republicans have compromised on $600 billion in spending cuts and tax hikes if a budget deal cannot be reached by Jan. 1. One benefit of the downgrade, says Nigel Gault, chief U.S. economist at HIS Global Insight, is that it focused on the need to do something about America’s debt.
A year later, S&P downgrade of U.S. looks like a dud (Washington Times)
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