The reality behind rating company fears

One of the MSM memes I keep hearing is that unless the debt limit is raised, the US will lose its AAA debt rating.  To which I say, phooey.

The big credit rating agencies, S&P and Moody’s have been quite explicit on where the debt problem is, and it’s the same thing that can tank an individual’s personal credit rating — too much debt.

S&P’s analysts cautioned that they “may lower the long-term rating on the US by one or more notches . . . if we conclude that Congress and the administration have not achieved a credible solution to the rising US government debt burden.”

The big worry: The “government debt-to-GDP ratio . . . is currently nearing 75 percent” and on course to hit “84 percent of GDP by 2013…

Moody’s echoed the sentiment: “The outlook . . . would very likely be changed to negative . . . unless a credible agreement is achieved on a budget that includes long-term deficit reduction.”

Read more here.

Yes, it is that simple.  When your neighbor goes on a binge and spends beyond his means, there’s a point where the lenders stop lending, and his credit rating goes from 750 to 450.  And that low rating is a warning to future potential creditors that this guy may not be able to pay back.

Our constitution prohibits the US from defaulting, but ratings agencies that got burned on the Greek debt are playing it cautious.  And at least Greece has the EU to bail them out.  Who’s going to bail the USA out?

Read more here.

 
 
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About Mystic Cowgirl

I worked overseas in the aid game for longer than I'd like to admit and learned several important things: 1) Third World countries aren't poor because America is rich. They're impoverished due to socialist governments that provide neither rule of law nor basic infrastructures; 2) These socialist governments redistribute wealth from taxpayers to the government workers. There's no benefit to the poor or downtrodden, and certainly not to the general welfare in terms of infrastructure improvements. 3) America is moving toward the Third World model. Rule of law has been subverted because equality under the law is disappearing as special interests carve out exemptions to regulations and special favors under the law. The redistribution of wealth to government began decades ago -- total compensation for government employees now outpaces salaries in the private sector.
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