In a Huge Reversal of Fortunes, The US has lost its AAA rating.
Already reeling from low interest rates, slow economic growth, and foreign investors eager to diversify away from U.S. assets, the loss of AAA status could cement the view the dollar is no longer the safest harbor in a troubled world.
The risk of a downgrade remains real even after Washington's $2.1 trillion budget savings deal, since it fell well short of the $4 trillion Standard & Poor's said would be enough to support the AAA rating with a stable outlook.
The S&P 500 absorbed its worst one week decline since November 2008 as concerns grew about the inability of world political leaders to deal with the European debt crisis or the faltering U.S. economic recovery.
And even though the S&P and other U.S. stock indices closed Friday either modestly higher or lower, the flight to safety in the form of cold hard cash is one that seems unlikely to end anytime soon.
For years, the dollar has acted as the world's reserve currency, an international store of value for central banks.
However, the fact the other safe-haven currencies are gaining at the expense of the dollar suggests investors' views may already be changing, perhaps in anticipation of a downgrade or at least a tough fight to hang on to AAA.
THE JAPAN EXPERIENCE
The fact that the yen has retained much of its value in the face of a Japanese downgrade over the past decade, including the most recent action by S&P earlier this year, does not suggest the dollar would be similarly immune, analysts said.
The yen is not the world's primary reserve currency, representing just under 4 percent of global reserves. The dollar is, with its share of global reserves at 60.7 percent.
Is Gold set for another steep rise?
Already reeling from low interest rates, slow economic growth, and foreign investors eager to diversify away from U.S. assets, the loss of AAA status could cement the view the dollar is no longer the safest harbor in a troubled world.
The risk of a downgrade remains real even after Washington's $2.1 trillion budget savings deal, since it fell well short of the $4 trillion Standard & Poor's said would be enough to support the AAA rating with a stable outlook.
The S&P 500 absorbed its worst one week decline since November 2008 as concerns grew about the inability of world political leaders to deal with the European debt crisis or the faltering U.S. economic recovery.
And even though the S&P and other U.S. stock indices closed Friday either modestly higher or lower, the flight to safety in the form of cold hard cash is one that seems unlikely to end anytime soon.
For years, the dollar has acted as the world's reserve currency, an international store of value for central banks.
However, the fact the other safe-haven currencies are gaining at the expense of the dollar suggests investors' views may already be changing, perhaps in anticipation of a downgrade or at least a tough fight to hang on to AAA.
THE JAPAN EXPERIENCE
The fact that the yen has retained much of its value in the face of a Japanese downgrade over the past decade, including the most recent action by S&P earlier this year, does not suggest the dollar would be similarly immune, analysts said.
The yen is not the world's primary reserve currency, representing just under 4 percent of global reserves. The dollar is, with its share of global reserves at 60.7 percent.
Is Gold set for another steep rise?
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