America's Debt Downgrade Sparks Market Panic

America's Debt Downgrade Sparks Market Panic

Moody's Downgrades U.S. Credit Rating

In a surprising act, Moody's has diminished the credit rating of the United States from "AAA" to the secondary "AA1" level which has resulted in widespread unease in all of the financial markets of the world. The astonishing choke has dropped Wall Street in the chaos of panic and it seems that the financial markets are facing the selling-off of assets on a huge scale.

The "Sell America" Phenomenon Returns

The downgrade has rekindled the "Sell America" feeling, similar to what it was during the market crisis earlier. Investors are quickly selling off their shares and bonds in American securities which has caused the yields of long-term Treasurys to rise. The yield of both 10 and 30-year government bonds went up due to the increased risk perception of investors.

Global Reactions and Economic Implications

The downgrade of U.S. credit rating has effects far beyond the borders of the U.S. One of the most noticeable steps has been taken by China, who has now cut down its U.S. debt holdings, while Japan has increased its stake in it, becoming a third-largest overseas creditor. The downgrade maybe and do complicate the negotiations about fiscal policies and tax plans in the U.S. which is an additional uncertainty to the economic landscape.