America's Credit Downgrade Threat.

On Monday April 18th stock markets worldwide dropped dramatically as the credit rating agency Standard & Poor warned that it had downgraded the outlook for America's credit rating. This is the first step before actually downgrading America's credit rating from the excellent AAA to AA. Much like if a persons credit rating is downgraded this will effect the amount of money that the American government will be able to borrow in the future, how long they will be able to borrow it for and how much interest they will have to pay.

Obviously there are a number of factors behind this downgrade threat. For example there are concerns that America seems to be playing the game much like the British did just before they crashed back to earth in 2008. Also when America's air traffic controllers finally wake up they will realise that the worst thing for America's long term interests would be for the mission in Libya to actually succeed. The main concern though is the political argument over America's debt ceiling. By law America's national debt is limited to $14.3 trillion and that limit is expected to be reached by mid-May amid deep partisan divisions over whether or not to raise that ceiling. If the Republicans and the Democrats can't agree to raise that ceiling then the American government will run out of money, be forced to default on the debt it already has and see it's credit rating downgraded to junk status like Ireland and Greece.

If the worlds biggest economy goes bankrupt then there will be no-one to bail it out and capitalism as we know it will cease to exist. So by issuing the warning S&P were telling America's politicians that they really need to pull their fingers out.