U.S. debt credit rating is danger of losing triple A status

March 15, 2010 by · Leave a Comment
Filed under: Credit News 

According to Moody’s in their quarterly report cited the rising federal budget as a reason why the United States debt rating has continued to be under review.  Going forward we can assume that either a significant increase in taxes is coming, large reduction in spending (not likely in the current climate) or issuance of more debt & currency (very likely).  In the latter scenario, the U.S.’s rating would be under review and likely will experience a reduction.

Fortune – The United States isn’t in jeopardy of losing its gold-plated credit rating, though by one measure America is closer to the ratings-downgrade danger zone than Spain.

That’s according to credit rating agency Moody’s. In a quarterly report about sovereign debt, Moody’s analysts wrote that despite market worries about rising government debt levels, there is “no imminent rating pressure” for the United States and other big governments carrying its highest triple-A rating.

But the report added that these governments’ margin for error “has in all cases substantially diminished,” thanks to a weak outlook for economic growth and enormous debt loads taken on to quell the financial meltdown of 2008-2009.

Cutting back on public spending too soon risks a double-dip recession, Moody’s said, while leaving stimulus measures in place too long could lead to a sharp rise in interest rates “with more abrupt rating consequences a possibility.”

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