Would Trump's U.S. Debt Proposals Lead to a Downgrade?

The transcript discusses the potential consequences of renegotiating US sovereign debt, highlighting the sensitivity of markets to default risks and the global impact of such actions. It examines historical cases like Puerto Rico and Argentina to illustrate the long-term effects of debt crises. The importance of maintaining credit quality, especially for the US as a reserve currency, is emphasized. The role of rating agencies in assessing default probabilities and the resulting economic implications are also explored.

What is the main concern about using business acumen to renegotiate US sovereign debt?

• It could make the US dollar more valuable.

• It might increase market confidence.

• It may increase the risk of default.

• It could lead to a stronger economy.

Why is the US considered the reserve currency of the world?

• Because of its large population.

• Due to its economic stability and credit quality.

• Due to its stable political system.

• Because of its strong military.

What is a potential consequence of changing debt parameters, as seen in Puerto Rico and Argentina?

• Higher interest rates.

• Immediate economic recovery.

• Long-term market exclusion.

• Increased foreign investment.

What happens when the probability of default increases?

• The country's debt becomes more attractive.

• The country's credit rating improves.

• The equity valuation increases.

• Rating agencies may downgrade the credit rating.

How does questioning the efficacy of debt affect a country's economy?

• It increases the country's GDP.

• It leads to a decrease in asset values.

• It stabilizes the currency.

• It boosts investor confidence.