The lesson from today’s UK almost-downgrade? There are no sacred currencies in the world.
PIMCO’s Bill Gross says he believes the selloff in the US market and currency is due to the surprise out of the UK. Even though the UK borrows in its own money (and could theoretically print its way out of a crunch), debt is, alas, debt. And no entity that’s drowning in a mountain of debt as big as its GDP ought to be AAA.
But it may ultimately be a long while before the ratings agencies make such a potentially cataclysmic change in America, in part because the ratings agency monopoly is owed to the kindness of the US government. We’re also still in an environment where the dollar is the place where panicked investors park their cash. And though this may end some day, there’s no evidence of it happening anytime soon. The bottom line is that there’s just no alternative. Not even close.
At the moment, the major indices are all off around 2%, with the dow dropping 157 points. The financials are actually holding up alright, including, (surprisingly), UK banks like Barclays, which is essentially flat.
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