America's Triple-A Rating Is At Risk

Financial Times:

Long before the current financial crisis, nearly two years ago, a little-noticed cloud darkened the horizon for the US government. It was ignored. But now that shadow, in the form of a warning from a top credit rating agency that the nation risked losing its triple A rating if it did not start putting its finances in order, is coming back to haunt us.

That warning from Moody's focused on the exploding healthcare and Social Security costs that threaten to engulf the federal government in debt over coming decades. The facts show we're in even worse shape now, and there are signs that confidence in America's ability to control its finances is eroding.

Read the whole story: Financial Times

Comments

[Lefty Larueaux]

wasn't Moody's part of the problem? Does anyone take them seriously anymore? Isn't that why the government stepped in? Because the foxes were guarding the chicken coops. Paleeze; tell Moody's to stuff their opinion. I feel much better with the government trying to get this ship of state up and running again.

[tomasedison]

Moody's should be put out of business for their role in the credit crisis.

[Rich Hosking]

We are soooo scr*wed!
The markets, government and the public are only now emerging from a media induced dream of a quick recovery, and the long term damage is being assessed.
Bottom line: average working people lost over 10 TRILLION is assets (retirement accounts, home values, savings...).
Jobs are dissapearing forever at a record rate.
The government refused to tax corporations and the wealthy.
The government refuses to fight corruption and impose SERIOUS regulaitons.

The US is hocked up to its eyeballs in debt, with no plan for recovery (that would pass congress).

Any idiot can do the math. We are in serious trouble.

[outnow]

The government created a new asset bubble partially restoring some of the wealth lost by printing more money, lowering taxes, deficit spending and borrowing. When the effects of these new inflationary forces set in, there will be even more economic woes such as rising prices and even more tight and expensive credit. The Fed has failed to control inflation and protect the investor class. Therefore, the investor class will help themselves to taxpayer funds with the idea that the banks are too big to fail and with falling prices, the value of their bonds.

I see a downward spiral that will take years to get out of and only then by reform and transparency. The secrets of the Temple run by the Fed will be kept and the role of the Fed expanded in all probability, not reined in or overseen by Congress.

[Americanium]

Was that a hoax??

Who the hell believes in Moody's??

I am laughing so hard my stomach aches. Moody's is asking for some serious trouble from the Feds.

Go ahead Mooooody's ,,,Cut away you idiots!!

See how long your company lasts when they begin to audit your fraudulent acts over the last 8 years.

Cut away !!!!!!!!!!!!!!!!!!!

[ejhickey]

What kind of audits are you talking about?

[ejhickey]

If we lose our AAA credit rating , the US dollar will be devalued , a lot. This will be bad for some people who have savings. It will be good for others for have no savings but who have a lot of debt. Wages will have to rise because the currency will be worth less. People who have large student loans will be able to pay these off in cheaper dollars. Homeowners struggling to pay off mortgages that can't afford will find it easier to make their payments or to pay off their mortgages in cheaper and more plentiful dollars. The same for car loans. Of course this may have a downside for creditors such as banks and mortgage companies because they would get paid in dollars that are worth less. However the banks could always get additional financial help from the Fed. All in all there are some pluses and minuses to a downgrade of our credit status. One more thing, the prices of some imports may rise a bit.

[outragedbystupidity]

i don't know why you assume wages "would have to rise." if unemployment is high, labor will continue to be repriced downward.

[ejhickey]

If the dollar is devalued in relation to other currencies, it will not buy as much in terms of imports. For example the price of all imported goods rose 1.6% in the month of April. OOn a yearly basis this would be a 19% increase. This went along with a decline in the value of the dollar against the major currencies in April. If wages did not rise, consumers' buying power would be reduced.

Also dollar devaluation would by definition increase the supply of money in the system. Long and short term interest rates would have to rise or the US government could not keep borrowing. Interest rates across the board would also rise which would also pump more money into the system. We went through a scenario like tis in the late 70's and early 80's when interest rates went into double digits.

My point is that employers would be forced to increase wages simply to allow employees to keep pace with the rising cost of living. Unions for example would not sit still for their members going backwards in purchasing power.

[icechaos]

This downward spiral started in the 60s'. I predict that Obama will be elected King. The government will take over everything to save us. People will be glad to turn over their upside down lives to the enlightened elites many of whom posts on here.

[tomasedison]

did you read that in the bible ?

[drymartini1]

A downgrade of US DEBT would be a BLESSING FROM HEAVEN !!

how so?

well it would tremendously increase our borrowing cost. which is what is needed to make people wake up and take notice.

otherwise, we will just be borrowing and spending recklessly.

a sharp wakeup call is due !!

Higher borrowing costs = less discretion in spending on frivolous things.

[jeremyemilio]

Of course America does not deserve a triple A rating. The US has no intention of ever paying off its debts. Ever. Anyone who can imagine a day when American workers are manufacturing cheep goods to stock dollar stores in China, living six people to a two room home, driving ten year old cars and bicycles, while they create a trade surplus big enough to repay the years of trade deficits, is dreaming. (Not that all of this won't happen; but guaranteed it won't be because America decided to buckle down and pay up.)

[leftLibertarian]

Uncle Sam - Pay your bills you Bum !

LOL

[tomasedison]

yes, let's borrow more so we can continue making the minimum monthly payments
kick the can down the road - the next guy will handle the tough stuff

[sanaaiman]

since they did an A+ job rating agencies before the crisis.

[markinaz]

Death to the Bilderbergs.

[jordan3189]

Thanks for the change obama.

[kobio]

drone

[sheilaofmiami]

I said the other day on another topic, how is the debt market?

Now we know, we are in big trouble.

10 years my friends, 10 years.

[ejhickey]

There goes the neighborhood

[ssfahrer]

The whole rating system is a FRAUD. After all, it uses SUBJECTIVE terms ("extremely", "very", etc.) to describe them (as I describe in this posting: http://sec.gov/comments/s7-04-09/s70409-3.htm). Thus it has to be totally overhauled before it can be relevant to investors....