Most questions in the popular media concerning the threat of Standard and Poor's downgrade of the USA credit rating (from AAA to AA+) has focused on what it means to consumers. In other words, will interest rates go up? However, here are a couple points often missed:
1. The downgrade may negatively affect USA soft power - its ability to persuade the world that it is both unique among nations and rightfully the world's leader.
2. The downgrade may convince highly skilled immigrants to think twice about immigrating to the USA. As is a well known fact, much of the USA economy hinges on the energy and drive that immigrants bring to the USA.
3. We predict a growing number of global players will begin discussing how to replace the dollar as the world's reserve currency. If this were to happen, the dollar would probably go into free fall for some time and capital would likely shift. (see the Chatham House report: "Beyond the Dollar..." here
4. Unfortunately for the Green Movement, less available capital in the future would mean a slowing down of investments in the "green economy" (although this would be offset by a reduction in consumption and the dangers that the "throw away economy" poses to the environment).
If any of these three possibilities were to emerge, the downgrade could prove more threatening to the current position of the USA than is currently being discussed in public.
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