With the recent credit rating downgrade by S&P of the U.S. to AA+ from AAA, is U.S. debt still a safe investment? After the downgrade, the stock market was sent into a tailspin on Monday as investors lost even more confidence in the economic recovery and the future prospects of U.S. and international businesses. It seems that there is no safe place for these investors to go these days considering the troubles the U.S. is facing and the problems affecting the EU. So where did they decide to seek a little security after this latest round of bad news? Well, it appears that they headed straight to U.S. debt – the very thing which the S&P downgraded. Therefore, the credit rating downgrade by S&P of U.S. debt seems to have had the effect of making U.S. debt a safer bet – or at least in the minds of investors.
Source: Freakonomics Blog