S&P’s downgrade of the U.S. credit rating from the highest AAA to AA + will have a more negative impact on the value of the U.S. dollar than on U.S. government debt, Jeffrey Gundlach said.
Founder of the DoubleLine Capital investment fund and one of the world’s most respected debt bond investors, Gundlach spoke in an interview with CNBC about the implications of the downgrade of the U.S. credit rating.
He said the downgrade was a referendum on the dollar situation, rather than US debt bonds. America has a good theoretical opportunity to pay off debt obligations, as the dollar remains the world’s reserve currency and the government can continue to print money to pay off its obligations.
Therefore, U.S. debt bond holders should not fear that they will not receive interest payments on U.S. government bonds. However, the cost of these payments will fall, as due to the operation of the printing presses, there will be many dollars in circulation, which, by definition, will lead to a fall in their value.