The big economic news that emerged at the start of this month was the downgrade of United States Sovereign debt by credit rating agency S&P. ING Commercial Banking chief international economist Rob Carnell explains in the August economic update video that the downgrade comes against the backdrop of a $2.1 trillion deficit reducing agreement, due to take place over the next decade. But, says Carnell, the agreement fell “well short of the $4 trillion ‘Grand Bargain’ that S&P had suggested would be necessary to stabilise the US debt to GDP ratio”.
He discusses the implications for the US and elsewhere – and explains why ING economists cut their US growth forecasts for 2011. “The historic decision was the first of its kind for the US and has ended up having a spill over effect for other nations, raising doubts about their own credit ratings.”