Does a “negative alert” worry the US economy?

Nils Pratley in The Guardian recently wrote a piece on Standard & Poor’s move to put the US’s first-rate credit rating on “negative alert” for the first time since 1941. This startled a lot of markets as credit rating agencies don’t normally confront a country which commands the world’s only reserve currency; and investors had assumed that S&P would do the decent thing and wait until the 2012 Presidential was over before displaying its concerns. However they are basically saying that the US debt position is so poor that it can’t wait any longer and significant measures steps must be taken by 2013.

But it’s speculation to pretend that Republicans and Democrats will be able to bury their differences in fiscal thinking. The hope is that a sense of crisis, and more costly yields on US treasuries will change the political calculatons. But a looming election will proably only embed disagreements. There’s is no harm in S&P issuing a heads-up but you wouldn’t assume it will make any difference to the workings of the US Political system.

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