By Max Clarke

A runaway budget deficit and no apparent policies to address it saw New York based credit rating company, Standard & Poor’s (S&P), downgrade the United States’ short term outlook to negative, from stable.

S&P affirmed its ‘AAA’ long-term and ’A-1+’ short-term sovereign credit ratings on the U.S., and revises its outlook on the long-term rating to negative from stable.

Currently the highest possible category, a drop of just one category, to any of the AA rankings, could have serious repercussions in the dollar dominated world economy.

Significant slides could see global financial transactions shift away from the dollar, for the first time since the IMF abandoned the gold standard in 1971.

“It has been the worst kept secret in financial markets that the two main political parties in the US are ways from resolving the budgetary issues,” commented Jeremy Cook, chief economist at World First foreign exchange.

“While the UK and some European nations have embarked on a program of austerity it is only recently that the powers that be in Washington have begun to take action against the deterioration in the nation’s finances.

Continued Cook: “This means that there is a 1/3rd chance that the US will lose its AAA rating in the next 2 years, a prospect that could see a huge swing away from US assets and the dollar itself…”