Moodys Won’t Review Credit Rating For Four Years! But If They Did They Would Downgrade

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Moody’s reserves view on U.S. rating until after budget

NEW YORK (Reuters) – Moody’s Investors Service said on Wednesday it will hold off on its judgment of whether to cut its sovereign credit rating for the United States until after the 2013 budget process is completed.

What budget process?  The US doesn’t do that anymore.  The American people in their infinite wisdom has decided we don’t need a budget, that’s why they re-elected Obama and left Reid in charge of the senate. 

Actually, I think Moodys didn’t mean they won’t.  They’ll see no budget process and then downgrade.

If policymakers are able to reach consensus and produce a budget that results in a stabilization of the fiscal outlook and “then a downward trend in the ratio of federal debt to GDP (gross domestic product) over the medium term,” Moody’s repeated it would likely affirm the Aaa rating and return the rating outlook to stable.

“In contrast, if negotiations fail to produce policies that lead to debt stabilization and ultimately reduction, then we expect to lower the rating, probably to Aa1,” Moody’s said, outlining a one notch downgrade.

Fitch Ratings holds a similar view with its AAA rating and negative outlook, reiterating earlier on Wednesday that a credible deficit reduction plan must have both tax increases and spending cuts.

In August 2011 rival Standard & Poor’s, in an historic move, cut its rating on the United States by one notch to AA-plus from AAA over the political gridlock in Washington that produced an environment so divisive as to prevent deficit-reduction measures.

Fitch is funny, they seem to be prescribing the same formula which has led to such resounding successes like Greece. 

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14 Responses to Moodys Won’t Review Credit Rating For Four Years! But If They Did They Would Downgrade

  1. philjourdan says:

    Moodys does not have to do a thing. The markets will do it on their own,

    • DirkH says:

      There’s basically no market for long term US bonds anymore, as since operation Twist the Fed buys 70% of them. When one player dominates 70% of a market, I wouldn’t call it a market.

      • philjourdan says:

        The fed has to continue. But that is merely a way of printing money. Everyone knows it, so they are going to devalue the US currency themselves. They can call our bonds anything they want, but China is not stupid and will not keep selling us stuff at what WE think our currency is worth.

        • DirkH says:

          I think that the Chicom government cares as little as BHO about their own people and as much as BHO about self-enrichment. So they will let their currency depreciate synchronously with the USD; as long as they can siphon off billions on their personal accounts why should they care.

        • philjourdan says:

          While I do not necessarily agree with your assessment of the Chinese leadership, I fully admit that my analysis was based upon rational humans. So yes, you could be right, even if for the wrong reasons.

        • DirkH says:

          The Chicoms try to maintain and grow their enterprise – which is the People’s Republic Of China. That is rational. In a psychopathic way.

          But they don’t give a flying shit for the humans in that enterprise. Look at the illegal children. Millions of them, results of families refusing aborting a 2nd kid. They are ignored by the state and have no rights, not even legal existence.

          I don’t dislike the Chinese. I dislike the crooks that run the nation and have the guns.

  2. DirkH says:

    Required reading for future US administration economic advisors.
    “Economic Calculation In The Socialist Commonwealth”
    By Ludwig von Mises (1920)

  3. HankH says:

    I see hockey sticks (first graph).

    Downgrading is inevitable under the circumstances.

  4. TedG says:

    HI Dirk.
    Even Der Speigal is gloomy about Obama.


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    Victory Speech Signals Compromises Ahead

    Barack Obama has won re-election in the US, but his power base remains weak. The embattled Republicans still have the majority in the House of Representatives, which means the president will have to be accomodating if he wants to achieve anything.


    US Set to Restage Greek Tragedy

    The US has more in common with heavily indebted southern European countries than it might like to admit. And if the country doesn’t reach agreement on deficit reduction measures soon, the similarities could become impossible to ignore. The fiscal cliff looms in the near future, and its not just the US that is under threat.

    • cdquarles says:

      Why in the name of Sam Hill should we compromise with people whose political philosophy is subjugation (aka tyranny or slavery)? /rhetorical

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