The majority of economists polled by Reuters about the aftermath of this month's debt ceiling debate believe that U.S. debt will be downgraded by at least one of the three major ratings agencies: Standard & Poors, Moody's and Fitch. The majority was slight--30 out of 53 total economists polled felt this way--but as Reuters points out, the results of a downgrade could be dire:
A downgrade of the United States' AAA credit rating is a bigger risk than a default and could over time add up to 0.7 percentage point to bond yields, members of a U.S. securities industry group said on Tuesday.
"That's on the order of $100 billion over time that we will add to our funding costs," said Terry Belton, global head of fixed income strategy at JPMorgan Chase. … Over time, he said Treasury yields could rise 60 to 70 basis points on a credit downgrade -- "a huge number because we're talking a permanent increase in borrowing costs."
Another consequence of a debt downgrade would be it being more difficult for consumers and business to borrow money. A downgrade could lead to another recession. In the above poll, one out of five economists believe that another recession is imminent.
This article is from the archive of our partner The Wire.
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