Buffett: US still AAA rated. Will S&P bow to the pressure?

Published: Monday, August 8, 2011, 10:45 [IST]

After downgrading the US from AAA to AA+ and a undertone threat that if fiscal position is not improved then there could be further downgrade has witnessed two kinds of reaction.

Analysts and bear economy experts like Nouriel Roubini had been saying that a downgrade is imminent. Willem Buiter from Citigroup was quoted on CNBC TV18 as "We expected this, at least for S&P, including the timing. The downgrade should have happened around 2009. "

Then on the other side there are many who believe this rating slash was not necessary, obviously one was US government which said it was a terrible mistake on part of the Standard & Poor's.

After the press release issued by S&P was challenged by the US Treasury officials as they pointed out that S&P has done a mistake in its calculations to $2.1 trillion. To this the rating agency changed its reasoning for downgrade. This led to a furore, as White House and the Treasury accused S&P of 'shaping arguments to fit its own conclusion.'

In fact many have said this downgrade was more of a political nature, like Bloomberg quoted Robert Litan, vice president for research and policy at the Kauffman Foundation in Kansas City, Missouri said “Clearly the ratings downgrade was a 'political decision" in the sense that the politics explained the timing of this, because the numbers have been irrefutable for a decade."

“It gives an enormous amount of ammunition to the Tea Party. They said the deal didn"t go far enough and they"ll say 'see"", he further added.

This was further confounded when Oracle of Omaha, Warren Buffett, stated to the media 'Standard & Poor's made a mistake in downgrading the US credit rating. I reiterate my view that the economy will avoid its second recession in three years.'

GoodReturns.in

Story first published: Monday, August 8, 2011, 10:45 [IST]