Moody’s warns US of credit rating fears

[Psephos]

Source: Financial Times

Moody’s Investors Service fired off a warning on Wednesday that the triple A sovereign credit rating of the US would come under pressure unless economic growth was more robust than expected or tougher actions were taken to tackle the country’s budget deficit.

In a move that follows intensifying concern among investors over the US deficit, Moody’s said the country faced a trajectory of debt growth that was “clearly continuously upward”.

Steven Hess, senior credit officer at Moody’s, said the deficits projected in the budget outlook presented by the Obama administration outlook this week did not stabilise debt levels in relation to gross domestic product.

“Unless further measures are taken to reduce the budget deficit further or the economy rebounds more vigorously than expected, the federal financial picture as presented in the projections for the next decade will at some point put pressure on the triple A government bond rating,” the rating agency added in an issuer note.

<snip>

Read more: http://www.ft.com/cms/s/0/a82cfe04-10f5-11df-9a9e-00144feab49a.html

[Go2Peace]

1. We have problems, but this is political bullshit designed to push the presidents policies

If this were not they should have warned last year, not now.

[dotymed]

4. Designed to

push the Corporate agenda. We have to create jobs through a large stimulus. The budget deficit can wait. Greatly increased wealth taxes will help raise stimulus money without affecting the deficit too much. It will also get money out of the hands of the few, into the hands of the many. Too bad Obama is not an FDR.

[Go2Peace]

5. exactly. It's just the voice of corporations using a rating agency to influence policy

[mrdmk]

26. While the corporate policy is being pushed, a few extra bucks can be made

The same thing is being here in California...

[SpiralHawk]

14. Shock and Awe

Ptooey

[johan helge]

24. Well said!

When a Dem comes into the WH, and even though a big deficit now for once is the right policy (because of the unemployment ), the debt problem suddenly becomes acute.

Since 1970, the federal deficit as a percentage of receipts, has increased under all five R presidents (Nixon perhaps excepted), and decreased under Carter and Clinton (http://en.wikipedia.org/wiki/File:US_annual_federal_deficits_over_receipts_1901_to_2006.svg). Why is the federal debt suddenly a topic?

[No Elephants]

2. If Moody had done the same when it rated derivatives, the U.S. might not be so broke.

[hobbit709]

8. Not a peep out of them about Bush's deficits, was there?

[Nay]

9. Zackly! Moody's is 1 of the 3 rating agencies that turned a blind eye

-- nay, it APPROVED -- the derivative trading mess when it was going on, and should have been DISSOLVED when it became obvious that it was in on the derivatives scam. And it has the temerity to lecture us??

[JDPriestly]

3. Dear Moody;

We are not going to be able to increase economic growth without increasing the budget deficit. It is not going to happen. Americans are stretched to the limit and can't get jobs. Don't worry. It won't just be the U.S. that loses its triple A rating. If we go down, a lot of countries go with us. And since everything is relative, our situation won't look so much worse than the situations in many of the other leading countries.

[Name removed]

6. Deleted message

Message removed by moderator. Click here to review the message board rules.

[hobbit709]

7. Good morning and goodbye.

[wellstone dem]

10. Ah, the corporate agenda, it smells so good in the morning.

And running our government wasn't enough, now they get to run ads to make running our government even easier.

[dipsydoodle]

11. So what

At the current rate triple star for countries will cease to exist and then it won't matter anyway - 2 star will be tops and life will go on.

[customerserviceguy]

13. Life will go on

with something called stagflation. I remember it from the late 70's, and frankly, it's a reasonable thing to worry about today.

Having a top credit rating is what keeps borrowing costs low, and even if Moody's (and the other agencies) turn a blind eye to the Federal Government's borrowing, investors will not. They know how they got burned just a short while ago, and will be determined not to have it happen again.

It's perfectly fine with me if we work towards balancing the budget from raising taxes on the top tier of people in this country, that would solve the problem just as much (if not more) than cutting spending.

[whyverne]

12. Hey Moody, we got a predator drone with your name on it!

They threaten, I threaten.

[lakeguy]

15. Moodys should be shut down.

Their bs ratings are half the reason we are in this mess.

[Joanne98]

16. Moody's is always wrong about everything.

[still_one]

17. Why would I believe a rating agency that got it all wrong about the financial meltdown

In fact, they were rating Lehman and Bear Stearns bonds as fine, just before they went under

[Vinca]

18. Bingo. That's the story. Moody's has zero credibility.

[Turbineguy]

19. Gee, and they've always been

right on the money before.

[rucky]

20. Why should we trust Moody's?

What they say makes sense, but they lost their credibility as a rating agency during the mortgage crisis.

[melm00se]

21. if you read a bit more on the subject

you will see the following:

The budget deficit in 2009 was $1.4 trillion. The White House goal has been to reduce the deficit to about 3 percent of GDP, which most economists say is sustainable. The budget presented yesterday though predicts it’ll average 4.5 percent over 10 years.

it's the growth of that number (deficit as a percentage of GDP) that is the big concern.

In addition, the big concern is also the increase in the 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 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 expenditures to redeploy those revenue funds to pay against the debt balance.

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.

[nyc 4 Biden]

22. Moodys = Joke

Who's next to give us advice, Countrywide or AIG?

[depakid]

23. A LOT of folks at these rating corporations ought to be in jail

[SOS]

25. How to keep AAA rating at Moody's:

Pay them $2 billion a year in cash.
Like an investment bank that wants to dump CDOs on unsuspecting marks.
Presto! AAA