Even though ratings agencies say the United States could lose its AAA rating if the government fails to lift its $14.3 trillion debt ceiling and defaults by an Aug. 2 deadline, in reality, America ceased deserving that rating a while ago, says international investor Jim Rogers.
Simply put, America borrows too much.
"Everyone already knows that the U.S. has lost its AAA status," Rogers says, according to the Wall Street Journal.
"Anyone who knows what is going on, already knows that the U.S. is now the biggest debtor nation in the history of the world. It's only S&P and Moody’s that haven’t figured out what is going on. The investment world knows that the U.S. is not AAA."
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Lawmakers must approve lifting that ceiling and avoid a default, but remain at impasse over the role tax hikes and spending cuts should play in the process.
"I don’t expect them to have real spending cuts. They have been talking about this for 40 years, talking about how they are going to solve the problem of the deficit. Remember the Grace Commission? Remember the Gramm-Rudman act? The Gramm-Rudman act said we couldn’t have deficit spending 25 years ago. They forgot about that," Rogers says.
Even if the country lifts the borrowing limit, the damage may be done anyway, which could still result in a downgrade.
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"Our guess is, when push comes to shove, the debt ceiling will be raised," Bob Doll, chief equity strategist at BlackRock, which manages $3.66 trillion, tells Bloomberg Television.
"What goes along with that is very difficult to tell, and that’s why the threat of a downgrade still exists."
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