On Thursday, Moody's Investors Service stated that they might downgrade the U.S.'s credit rating because of issues over the debt limit. And a debt limit is when you have a set amount of money that can be borrowed and once you reach that limit you can't borrow anymore money, which includes the issuance of bonds.
However, in Congress there was a vote the day before Moody's warning and Congress had decided not to increase the national debt limit. However, that is dangerous because if the debt limit question is not solved soon then it might provoke another crisis. Not only that but Jackie Calmes, the author of this article*, writes that "House Republicans have said they will not agree to increase the debt limit without parallel action on spending cuts of an even greater amount".
As we were talking about in AIS today, many people in Detroit in 2008 were forced out of their homes because they couldn't afford to live there anymore. That was right at the start of the recession and in 2011 we, the U.S., is still recovering. Another recession would be even worse the second time, especially because we are not fully recovered yet. Which would put more people out of work and make more people foreclose their homes.
Hopefully Congress will reach a decision soon to help prevent a default of a debt payment and another crisis.
*click HERE to see the article "Fight Over Debt Ceiling Risks Credit Rating, Moody's Warns"
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