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.
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.