August 7, 2011 1:28 PM EDT
Perhaps all those doomers and gloomers in Australia moaning about how tough times are here, will lift their blinkers and have a quick look at Australia's AAA credit rating and compare that to the US after Standard & Poor's cut on Saturday, our time.
And perhaps they might also like to look at the separate statement on Saturday from the International Monetary Fund which said Australia was well placed to cope with a global slowdown, with low debt, room to move on monetary policy, and a solid outlook (see first story).
That is very much unlike the US and some of those other AAA-rated economies such as the UK, Germany, France and others in the eurozone where deficits, growth and debt worries remain high.
After slashing the ratings of the likes of Ireland (it used to be AAA-rated economy several years ago), Greece, Spain, Portugal, and warning others, it was perhaps about time that a ratings group like S&P took America to task for its profligate ways.
S&P had stiffened its warning to the US in April and then in June warned on the looming credit ceiling default possibility, while saying that it wanted to see spending cuts of at least $US4 trillion over 10 years.
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Instead it got $US2.5 trillion at most and they are not certain by any means, thanks to the country's increasingly deadlocked political debate about spending, debt and the economy.
And that political uncertainty in the US has driven the S&P downgrade.
In arguing that last week's debt deal did nothing, but in fact raised the likelihood of another debilitating political argument over spending and debt in the not too distant future, S&P became the first ratings group to lower America's AAA colours for the first time ever.
The new rating is AA plus, but the long term credit outlook is negative, meaning another cut could happen in two years if moves to cut spending are delayed, or the US economy slides into recession, prompting a surge in the size of the budget deficit and a jump in the country's national debt.
According to S&P, the US is now in a group of AA rated economies which includes China, Taiwan, Kuwait, New Zealand and Japan.
Germany, France, Canada, the UK, the Netherlands, Sweden, Hong Kong, the Isle of Man, Denmark, Finland and Australia are among the remaining 18 AAA economies.
And it has to be remembered Australia, Canada, Denmark, Finland, and Sweden all have, at one time or another, lost their top-notch ratings before working their way back to AAA status.
But no country whose currency is the major international unit (and major reserve currency) has had its credit rating cut, so we are in unknown waters here.
After markets finished in the green in the US after a day of wild swings on Friday night, our time, the S&P move could send shockwaves through markets, pushing up US bond yields at a time of economic vulnerability, and creating a long-term threat to the status of the US dollar as the world's reserve currency.
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