Moody's Warns the U.S. of a sovereign credit rating downgrade

The Financial Times is reporting Moody's will warn the United States of a credit ratings downgrade due to it's debt.

Moody’s Investor Service, the credit rating agency, will fire a warning shot at the US on Monday, saying that unless the country gets public finances into better shape than the Obama administration projects there would be “downward pressure” on its triple A credit rating.

Examining the administration’s outlook for the federal budget deficit, the agency said: “If such a trajectory were to materialise, there would at some point be downward pressure on the triple A rating of the federal government.”

It projects that the federal borrowing is so high that the interest payments on government debt will grow to more than 15 per cent of government revenues, about the same by the end of the decade as the previous 1980s peak.

Lovely.

Moody’s worries that the government will struggle to get political agreement either to raise tax revenues significantly from their current low of 14.8 per cent of national income, or to cut federal spending far from its high of 25.4 per cent of national income.

This is the last of the big three warning the United States. S&P and Fitch already have.

One must wonder though since the credit ratings agencies were so heavily involved in CDOs and giving pure junk AAA credit ratings....

Still the warning is real because it would affect the interest rate the U.S. pays on the debt. Ya know, bad credit rating, higher rates.

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What would it be downgraded against?

The rating agencies don't control interest rates. More importantly, who are investors going to run to? Where is all that money going to go if America gets downgraded?
Besides, the rating agencies have proven themselves to be cowards when push comes to shove. I think this is an empty threat. They will continue to rate America AAA right up to our currency implosion.

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Considering we've had zero regulation, even fines

Not that I do not believe the U.S. is burdened in beyond belief debt, refusing to do the right types of Keynesian moves, etc. that will lead this country to economic ruin...

but my immediate thought was do these credit rating agencies have more power than sovereign states?

We haven't seen even a fine, nothing on their inside ratings game on CDOs, not even from subprime, no major government investigations, such a bunch of economists, blogges and a few journalists bringing it up...

yet they can downgrade entire nations so their interest payments skyrocket or threaten it?

Yeah, in comparison of GDP to debt ratios, tax revenues to debt and so forth, how does the U.S. stack up to the rest of the world paying the Banksters?

Maybe they think they will give AAA to China and India who now have our industries and jobs?

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You are exactly right. The

You are exactly right. The secret story behind the bubble is the collusion between rating agencies and investment banks. CDOs and CBOs were practically invented by S&P and Moody's structured finance units.

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Maybe Against Debt Striuctured by Cows?

Why are these guys still taken seriously? After the last round of fraud by rating agencies, how do they even have the money to stay in business -- let alone the credibility? Do their shareholders even believe their annual reports?
Frank T.

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Frank T.

Moody's Warns the U.S. of a sovereign credit rating downgrade

Moody's is lagging so far behind the times & REALITY, they've recently issued a warning to the Confederate States of America that the Confederate Dollar will be downgraded UNLESS they start winning some battles.

In the meantime, smart investors WORLDWIDE have ALREADY 'downgraded' the shytty American dollar MONTHS AGO.

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