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September 11, 2012

Moody's: Unless The US Gets Its Debt-to-GDP Ratio Under Control, We'll Likely Cut Its Credit Rating

Incidentally, the Democrats claim, and the media claims with them, that the drop in the US credit rating was due to Republican brinksmanship on the debt. That it was only the Republicans' pushing the debt deal to the brink that caused the drop in credit rating.

Two problems with that: 1, doesn't that mean that since the debt real was reached the credit rating should be restored? And yet it wasn't.

2, well, this story, making it clear that it was not Republicans' demands that we get debt under control that caused the drop in credit rating. Rather, it was, get this, the debt itself. The debt Republicans wanted to do something about.

If those negotiations lead to specific policies that produce a stabilization and then downward trend in the ratio of federal debt to GDP over the medium term, the rating will likely be affirmed and the outlook returned to stable, says Moody’s.

If those negotiations fail to produce such policies, however,
Moody’s would expect to lower the rating, probably to Aa1.

Currently Moody's rates the US as AAA, but with "negative outlook." They do not think they will keep the rating that way through 2014 -- either the negative outlook will be cured, or it will result in a downgrade.

Germany's Worried, Too: The Narrative ignores the concerns of German ministers.

Ahead of the election in the United States there is great uncertainty about the course American politics will take in dealing the U.S. government's debts, which are much too high," Schaeuble said. "We need to remind ourselves of that sometimes and the global economy knows that and is burdened by it."

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posted by Ace at 02:03 PM

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