Friday, July 15, 2011
The US risks its reputation with a looming debt default. Moody's, the credit rating service, has already put the country on a watch list for downgrading. The question facing everyone is what would happen if the US does go over the edge. Would it lose its reputation for sterling credit once and for all? Could it climb back to a solid rating in the future if it gets debt under control? No one knows. Hence, the deep fear among financiers, politicians and others. The reputation for creditworthiness as a nation is fundamental. That is why Greece is having so many problems and other countries are in jeopardy. Market makers no longer believe that money lent to these countries will come back with interest. No amount of communication can allay that fear other than paying up. The closer that warring politicians in Washington push the nation to default, the more the markets will get nervous. It could be devastating.