Moody’s, the well-known ratings agency, downgraded the U.S.’s AAA debt rating this morning. The move comes on the heels of debt ratings downgrades made over the past few months, including downgrades on Greece’s debt and on Portugal’s debt. The downgrades on Greece’s debt sent the European Union’s monetary union into disarray for weeks. Of course, the fact that the U.S.’s sterling debt rating has now been tarnished is prompting even more widespread fear. The U.S. is the world’s pre-eminent economy, so a debt ratings downgrade is big news — especially since U.S. Treasuries had formerly been seen as one of the safest investments in the world.

USA Bankrupt

Part of the reason for the downgrade is due to the fact that many U.S. taxpayers plan to revolt this year,  encouraged by the Tea Party movement, and by those who wish to protest the deficit spending that has been a part of the U.S. economic picture for nearly 30 years. “American taxpayers are sick of government waste,” explains one economist, “they aren’t going to fund it anymore. So a mass revolt is being planned.” The financial crisis of nearly two years ago started a recession that led to stimulus spending, ballooning the federal deficit in the U.S. The higher deficit, combined with reports of Americans planning to refuse to pay their taxes, prompted Moody’s to downgrade the debt rating to reflect the increased possibility that the U.S. will default on some of its debt.

The news has triggered a degree of panic in the financial markets, with China announcing that it may cash in some of its Treasury notes early. China says that it is willing to pay premiums on cashing in its debt early, and plans to stock up on gold. China is also considering increasing its investment in Japanese yen and even in euros, now that OPEC has announced that it will now conduct business in euros. “The Greek issue was just a blip,” says one official. “While it took some time, the euro zone leaders managed to mostly resolve the crisis. Besides, this move will help shore up the euro, since most of the world’s oil will now be bought and sold using euros.”

With the U.S. government devastated by this news, and financial collapse looming, America is now scrambling to see if it can restructure its debt. Canada, the U.S.’s neighbor to the north, has offered a bailout loan. The loan, in the amount of $500 billion, will be used to help the U.S. meet its obligations to China, since that is the approximate amount of U.S. assets that Chinese officials plan to liquidate. China has around $1 trillion in U.S. bonds, and plans to cash in about half of that in order to fund its plans for asset diversification.

Canadian officials say they are in a good place right now, and that it is only right to help America out of this tight spot. “After all,” points out one Canadian analyst, “this must be very disappointing for the Americans. Plus, the complete collapse of the U.S. economy would devastate the world’s finances further. We can help prevent that with a bailout loan.”

All of this news is quite disheartening to U.S. officials and to the U.S. public. Or at least it would be if any of it were true. Happy April Fools’ Day!

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Tags: Debt Rating, Rating