The British pound took a beating when Fitch warned about U.K. government debt losing their AAA credit rating due to their large budget deficit. Of course the Brits immediately pointed out that their deficit reduction plan would solve this problem, so no worries.
If a credit downgrade can threaten British government debt, it can certainly happen here too, across the pond in the land of even bigger deficits. (Especially when our deficit reduction strategy seems to consist of more spending.) Although deficit spending can be very helpful to offset weak private demand in dire economic circumstances, it’s not wise as an ongoing policy. It could eventually catch up to the U.S. in the same way it has to the U.K. And it’s not like the weak dollar needs any help.
