US credit rating at risk, Moody's warns

[TwixVoy]

Source: UK Telegraph

The credit ratings agency cautioned that if the US were to grow at slower pace levels than expected, the largest economy in the world’s already-extended finances could be over-stretched, in turn damaging its AAA credit rating.

Were the US to lose its AAA rating, it could cause further financial damage, by increasing the cost of borrowing money, a necessary evil for a country predicted to have a $1.56 trillion (£980bn) budget deficit this year.

The warning comes hot on the heels of a similar warning to the UK in mid-January, when Moody’s Pierre Cailleteau, head of sovereign ratings, said the UK needed a budget plan in order to ensure it keeps its high-grade debt status.

However the warning against the US may come as a surprise, given it comes just six weeks after Moody’s said it had no plans to lower the US’s debt rating, with the agency saying that ‘the outlook is stable.’

Read more: http://www.telegraph.co.uk/finance/economics/7153180/US-credit-rating-at-risk-Moodys-warns.html

[DBoon]

1. we are about to be IMF'd (nt)

[salib]

3. Yep, disaster capitalism

We can see how the other half (of the world, and more like 80%) suffers under IMF dictates.

[northzax]

7. Really? The IMF is going to loan us money?

Our own money? Nice.

The US will never default on treasury debt. Never. Not going to happen. Basically, can't happen.

[salib]

10. The Fed already loans "our" money to "us"

"Money from nothing..." and you know the rest.

"Out of thin air", perhaps. Either way, it will be Neo-cons sayin' "Ya gotta do what ya gotta do, or we will blow up you economy". I think it WILL come in the auspices of the IMF, but the particulars are, while interesting, are not really the point.

[Heywood J]

15. If only because it will keep running the printing presses.

The same way Germany "paid off" its WWI debt.

[brentspeak]

2. Maybe we can bribe Moody's the way they accepted bribes from Lehman, Citi, Chase, etc.

Seriously, though, this was long time in the making.

[Raster]

4. Is this the same Moody's that gave all those bad housing loans an "AAA" rating?

[Alcibiades]

5. Beat me to it

My first thought as well.

[liberation]

6. I love how in finance, the criminals feel entitled to not only police themselves...

... but they feel they have to be taken seriously else the system collapses. In other words, the whole system is based on criminals controlling perception fueled by what amounts to black mail against the rest of the people.

Most, if not all, these rating agencies should have been prosecuted for utter fraud. What a f*cked up system we have developed to base our whole existence around: a system based on abstract concepts such as wealth and value, whose perception is controlled and manipulated by those who have most to gain, while everyone else has to enslave themselves in order to make up for the deficit between the trumpeted perception and reality.

Good grief humans are so damned stupid, I hope when the aliens find our planet... I hope at least the dolphins can make a case as to why we shouldn't be wiped out right out.

[Raster]

8. I work in the financial industry. I know well who Moodys is. One word comes to mind:

ACCOMPLICE

[melm00se]

9. the challenge is

to keep budget deficits underneath the 3% of GDP. This, which most economists state, is "sustainable". The budget proposed by the Obama administration as well as the projections of future deficits, puts the deficits at an average of 4.5% over the next 10 years. THAT is an unsustainable rate of deficit spending.

That level of deficit spending will have a dramatic impact upon the overall national debt. In the book "Growth in a Time of Debt", Carmen M. Reinhart, of the University of Maryland, and Kenneth S. Rogoff, of Harvard University, after crunching the numbers, found that once a national debt hits the 90% of the real GDP threshold, the ability to grow an economy becomes progressively more difficult. This makes the ability to lower the debt even more difficult as a country can no longer expect to be able to grow itself out of debt but rather that they must take the painful steps of cutting back services to redeploy tax revenue to pay it's debt service and even deeper cuts to begin to retire that debt.

when that happens and governments can either no longer provide essential services or dramatically scale them back, the country begins to destabilize as people lose faith in their leadership.

While Moody's missed the boat completely on the private sector, they may be spot on when it comes to the federal deficit issue.

[Yavin4]

11. Easy Fixes - Cancel the Wars and Raise Taxes on the Rich

That would do the trick, wouldn't it?

[melm00se]

12. easy fixes

are usually fraught with dangers.

Raise the taxes too much and you freeze the movement of money and static money is nothing more than a pile of paper and usually excluded from taxation.

Cut them too much and there are (rightful) howls of outrage.

[apnu]

13. You need one more step there: Close all US international bases.

Bring EVERY troop home and we'll save Billions a month.

[JackRiddler]

Moody's should be immediately seized and shut down, just like Arthur Andersen.

Moody's and the other ratings agencies played the single most important role in what is widely acknowledged as the largest and worst financial fraud in history. The securitization and derivatives bubble based on junk mortgages would have been impossible if the ratings houses had not given AAA ratings to toxic securities. They took their fees from the Wall Street banks and didn't even examine the underlying assets of these supposedly too-complex bonds, as whistleblowers from within the companies revealed and as is prima facie obvious. Without AAA ratings, GS-JPM-Citi-BoA and the rest would have never been able to sell these securities to the legions of investors they duped around the world. The ratings houses made it possible, and they are at the center of the scam. Any serious investigation of the fraud would have started with them.

For providing false audits on behalf of Enron's endless schemes, Arthur Andersen was shut down. What Moody's and S&P did beats that by an exponential factor. What does it mean when Moody's is allowed to continue, uninvestigated, and then even gets to downrate California - which may be fiscally irresponsible, but hardly can be compared to gangsters like AIG and Citi who prior to the collapse were getting nothing but green lights from the "independent" ratings agencies? This is class war with collaboration from the very same institutions that are being attacked (the governments).

[JackRiddler]

14. dupe

x