Topic: Moody's Threatens US Downgrade Due To Soaring Debt, "Fiscal Deterioration" (Read 129 times)
March 01, 2018, 06:08:50 AM
The ratings of Moody's are totally political. They are in no way determined by true reality checks. They always are caused by political agendas. Technically speaking, US should have been downgraded for soaring debt years ago. If the threat of a downgrade is made now, be sure that there is some precise political reason for that.
February 09, 2018, 12:11:26 PM
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Back in 2011, Standard & Poors' shocked the world, and the Obama administration, when it dared to downgrade the US from its vaunted AAA rating, something that had never happened before (and led to the resignation of S&P's CEO and a dramatic crackdown on the rating agency led by Tim Geithner).
Nearly seven years later, with the US on the verge of another government shutdown and debt ceiling breach (with the agreement reached only after the midnight hour, literally) this time it is Warren Buffett's own rating agency, Moody's, which on Friday morning warned Trump that he too should prepare for a downgrade form the one rater that kept quiet in 2011. The reason: Trump's - and the Republicans and Democrats - aggressive fiscal policies which will sink the US even deeper into debt insolvency, while widening the budget deficit, resulting in "meaningful fiscal deterioration."
In short: a US downgrade due to Trumponomics is inevitable. And incidentally, with today's 2-year debt ceiling extension, it means that once total US debt resets at end of day - unburdened by the debt ceiling - it will be at or just shy of $21 trillion.
(Link to image: https://www.zerohedge.com/sites/default/files/styles/inline_image_desktop/public/inline-images/total%20us%20debt%20feb%202018.jpg )
We expect if not a full downgrade, then certainly a revision in the outlook from Stable to Negative in the coming months.
Here's Moodys:
https://www.zerohedge.com/news/2018-02-09/moodys-threatens-us-downgrade-due-soaring-debt-fiscal-deterioration
Nearly seven years later, with the US on the verge of another government shutdown and debt ceiling breach (with the agreement reached only after the midnight hour, literally) this time it is Warren Buffett's own rating agency, Moody's, which on Friday morning warned Trump that he too should prepare for a downgrade form the one rater that kept quiet in 2011. The reason: Trump's - and the Republicans and Democrats - aggressive fiscal policies which will sink the US even deeper into debt insolvency, while widening the budget deficit, resulting in "meaningful fiscal deterioration."
In short: a US downgrade due to Trumponomics is inevitable. And incidentally, with today's 2-year debt ceiling extension, it means that once total US debt resets at end of day - unburdened by the debt ceiling - it will be at or just shy of $21 trillion.
(Link to image: https://www.zerohedge.com/sites/default/files/styles/inline_image_desktop/public/inline-images/total%20us%20debt%20feb%202018.jpg )
We expect if not a full downgrade, then certainly a revision in the outlook from Stable to Negative in the coming months.
Here's Moodys:
Quote
The stable credit profile of the United States (Aaa stable) is likely to face downward pressure in the long-term, due to meaningful fiscal deterioration amid increasing levels of national debt and a widening federal budget deficit. However, the US economy is very strong, wealthy, dynamic and well diversified, and its role in the global financial system is unmatched. These factors help compensate for the impending fiscal weakness, Moody's Investors Service says in a new report.
Moody's has already indicated that rising entitlement costs and rising interest rates will cause the US's fiscal position to further erode over the next decade, absent measures to reduce those costs or to raise additional revenues. The recently-agreed tax reform will exacerbate and bring forward those pressures.
Moody's current baseline forecast is that the sovereign balance sheet will continue to weaken over the coming decade. Absent corrective fiscal measures, the US's Aaa rating will rely increasingly on its unparalleled economic base and the central role it plays in the global financial system.
The US economy's dynamism, competitiveness, rich resource endowment, high income levels and relatively supportive demographic trends underpin its economic strength. While evidence of declining growth potential, coupled with emerging aversion to open trade and foreign labor during a period of rising global competition, suggest that this level of relative strength could erode over time, we expect the US' broad economic strength to support its credit profile for the foreseeable future.
Moreover, the role of the US dollar in global financial markets and the depth and liquidity of the US treasury market remove all but the most extreme government liquidity and balance of payment risks. They insulate the US from external shocks and shifts in financing conditions in a way not seen with other sovereigns.
Moody's research subscribers can access this report, "Preeminent financial, economic position offsets weakening government finances", at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1108357
Moody's has already indicated that rising entitlement costs and rising interest rates will cause the US's fiscal position to further erode over the next decade, absent measures to reduce those costs or to raise additional revenues. The recently-agreed tax reform will exacerbate and bring forward those pressures.
Moody's current baseline forecast is that the sovereign balance sheet will continue to weaken over the coming decade. Absent corrective fiscal measures, the US's Aaa rating will rely increasingly on its unparalleled economic base and the central role it plays in the global financial system.
The US economy's dynamism, competitiveness, rich resource endowment, high income levels and relatively supportive demographic trends underpin its economic strength. While evidence of declining growth potential, coupled with emerging aversion to open trade and foreign labor during a period of rising global competition, suggest that this level of relative strength could erode over time, we expect the US' broad economic strength to support its credit profile for the foreseeable future.
Moreover, the role of the US dollar in global financial markets and the depth and liquidity of the US treasury market remove all but the most extreme government liquidity and balance of payment risks. They insulate the US from external shocks and shifts in financing conditions in a way not seen with other sovereigns.
Moody's research subscribers can access this report, "Preeminent financial, economic position offsets weakening government finances", at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1108357
https://www.zerohedge.com/news/2018-02-09/moodys-threatens-us-downgrade-due-soaring-debt-fiscal-deterioration
....
I'm not certain if Trump or "Trumponomics" deserves all of the blame here. To suggest all the evils and bad policy the united states has been subject to over the past 3 decades is all to blame on a single man who has only been in office for close to a year seems a bit unfair to me. The media hasn't been completely honest or accurate in a very long time. Even zerohedge which used to carry an independent slant and pride itself on its objective stance appears to have sold out and regularly publishes pro establishment propaganda.
Its an interesting time to be alive. Whether you blame Trump or not, it is possible that deficit and debt are real issues the entire world must contend with. If the US federal government ever defaults on its debt, it could drag the economies of the world down with it. Wish this issue had more coverage and scrutiny, its important and somewhat neglected it would seem.
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