Moody's: US Deficit Threatens AAA Credit Rating

Meredith Jessup | December 08, 2009 9:17 AM

We're in trouble and unless the country's leaders wake up to this fact, we're going to lose our status in the world. Today's Wall Street Journal features this warning from Moody's Investor Service:

"the U.S. and U.K. must prove they can whittle down their ballooning deficits to avoid threats to their triple-A credit ratings."

In a report released on Tuesday, Moody's set the two countries apart from other top-rated sovereign borrowers, calling them merely "resilient" rather than "resistant," a label it applied to Canada, France and Germany, where public finances are in better shape.
Moody's released the report as part of an effort, spurred by investor demand, to examine the creditworthiness of the world's most highly rated countries. There are 17 such "triple-A"-rated countries, ranging from the U.S. to Australia.
In both the U.K. and the U.S., Moody's said, much will depend on the vigor of the economic recovery and the willingness of governments to shrink the deficits.
Under the most pessimistic scenario put forward by Moody's, the U.S. would lose its top rating in 2013 if economic growth proves anemic, interest rates rise and the government fails to dent the deficit or recover most of its assistance to the financial sector.
Unlike several years ago, "now the question of a potential downgrade of the U.S. is not inconceivable," says Pierre Cailleteau, chief international economist at Moody's. "In a world that has lost its compass a bit, people want to understand what happens to risk-free assets."

Full story here