U.S. Credit Rating Downgraded Again
Looks like the third round of bond buying by the Federal Reserve isn’t popular with everyone. Particularly Egan-Jones, a nationally recognized statistical rating organization:
Egan-Jones Ratings Co. said Friday it downgraded its U.S. sovereign rating to AA- from AA on concerns that the Fed’s new round of quantitative easing, or QE3, will hurt the U.S. economy. The ratings agency said the Fed’s plan of buying $40 billion in mortgage-backed securities a month and keeping interest rates near zero does little to raise GDP, reduces the value of the dollar, and raises the price of commodities. “From 2006 to present, the US’s debt to GDP rose from 66% to 104% and will probably rise to 110% a year from today under current circumstances; the annual budget deficit is 8%,” Egan-Jones said in a note. “In comparison, Spain has a debt to GDP of 68.5% and an annual budget deficit of 8.5%.”
Egan-Jones was the first recognized credit agency to downgrade U.S. credit about a year ago, and shortly after Moody’s followed suit. Now they’ve downgraded it again from AA to AA-. Looks like where headed down that road again.