Everything Changes in Global Financial Markets If There's a Credit- Rating Cut

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US OUTLOOK

Less than three years after the collapse of Lehman Brothers, a second financial crisis is now more likely than not. Against the backdrop of calm equity markets and a positively sanguine bond market, I know this makes me sound like Chicken Little. But let me explain.

Successive statements by the two largest credit-rating agencies have made it much more likely that the United States government will have its credit-rating cut, regardless of whether the country's politicians agree to raise the debt ceiling before the money runs out on 2 August.

This week, even Barack Obama appeared to give up on getting a "big deal" to cut $4trn (2.5trn) from the …