The downgrade of the U.S. rating by S&P has led to a collapse of the global stock markets. Long-term sovereign rating of the country was downgraded from the maximum AAA to AA + with a negative outlook, which means that further downgrade of the U.S. economy is possible. Stock markets reacted by a prolonged drop, and the price of gold is setting new records.
According to John Chambers, managing director of Standard & Poor's, the U.S. may need more than a decade to restore the highest rating. This ranking can be further reduced in the event that Barack Obama and Congress fail to agree on reducing the budget deficit.
The notice of the downgrade came on Friday night, when the American markets were already closed. Nevertheless, a wave of panic sales began on Thursday and continued into the beginning of the week.
At the same time, the rate of return on U.S. Treasury securities has reached the minimum marks for the past two years, which meant another increase in interest. However, the S&P is questioned about the possible release of insider information, which some people managed to make a great deal of money on.
Despite the downgrade, the representatives of the Russian Finance Ministry claim that they are not going to cut investment in the U.S. debt securities. "No, we will not revise the reserve investments, because there is not much difference between AAA and AA+ ratings," said Deputy Finance Minister Sergei Storchak in an interview with Interfax.
Meanwhile, because of the weakening of the US dollar sovereign wealth fund has lost more than 108 billion rubles from January 1 to July 31, and the Reserve Fund lost 39.92 billion rubles for the same reason.
Russian Reserve Fund and National Welfare Fund have 45% of US dollars and Euros and 10% of British pounds in their structure. The total amount of the Reserve Fund of the Russian Federation, as of August 1, 2011, amounted to 734.98 billion rubles, of the National Wealth Fund (NWF) - 2 trillion 566.04 billion rubles. In dollar terms the amount of the Reserve Fund at that date amounted to $26.55 billion, NWF - $92.7 billion.
Brent crude oil last week fell by 7.5% and continued to fall in price during the current week. The decision of Standard & Poor's contributed to the growth of gold, which investors are running towards to avoid oil, stocks and currencies. Gold set a new record, breaking yet another psychological mark of $1,700 / oz.
Also read: Who owns the dollar?
The Russian government presidium planned for August 11 has on its agenda the issue of the main directions of the debt policy of Russia for 2012-2014. The Finance Ministry intends to increase the size of borrowing three-fold - up to two trillion a year. The Ministry suggested borrowing not from the domestic market, but from foreigners who are being created proper conditions for by Kudrin's Ministry.
It is not ruled out that the decision of S&P will cause the downgrade of other holders of the highest credit rating. The attention of the experts is drawn to the UK, where the government debt continues to rise (88.5% of the GDP) against a background of economic stagnation (an increase of 0.2% in the second quarter).
Generous to migrants France is also in debt - 97.3% of the GDP with a budget deficit of 5.6%. Austria's national debt is 80%, the budget deficit is 3.7%. In the Netherlands, public debt has reached 74.3% of the GDP, and the budget deficit is 3.7%. All these countries have the highest AAA rating.
Today, however, agency Standard &Poor's has reassured the markets, confirming AAA credit ratings of France with a stable outlook.