Rowley 12 Charles Rowley, Professor Emeritus of Economics at George Mason University, 10/15/12, “Renewed threats to U.S. credit rating,” Charles Rowley’s blog, http://charlesrowley.wordpress.com/2012/06/15/renewed-threats-to-u-s-credit-rating/
If Moody’s downgrades and if S & P further downgrades U.S. credit ratings, this would move the United States out of the exclusive clubof AAA-rated nations, and throw into question the privileged statusofU.S. Treasury securities as a safe havenfor global investors. Anysignificant flight from Treasuries would raise Treasury bond rates, withcrippling consequences for the economy. A 1-percentage point increase in rates would raise Treasury debt payments by $1 trillion over the next decade, wiping out the benefits of all the budget cuts enacted by Congress last year. The dynamics of such a process may prove to be devastating, moving the U.S. federal government onto a path of sovereign downgrades that accelerates an already worsening fiscal situation. Greece here we come.
