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AAA Rating Tough to Defend as U.S. Debt Soars

Posted By admin On January 31, 2011 @ 9:09 am In Money Watch | Comments Disabled

Kevin Hassett
Bloomberg [1]
Jan 31, 2011

Last week, Standard & Poor’s lowered Japan’s bond rating to AA-, the fourth-highest level. By that standard, the U.S. got away with a slap on the wrist from Moody’s Investors Service, which warned merely that “the probability of assigning a negative outlook in the coming two years is rising.”

If you look at the U.S. budget trajectory with an eye on the lessons from Japan’s recent history, there’s a strong case that the U.S. rating should be cut immediately.

It’s true that the U.S., with total government debt equal to 98.5 percent of gross domestic product, according to Organization for Economic Cooperation and Development data, has many years of unrestrained deficits ahead before it reaches the crisis point of Japan, which has debt of 204 percent of GDP.

A more plausible target, however, is 135.4 percent of GDP. That was Japan’s debt in 2000, just before S&P first downgraded it from AAA in February 2001.

Full article here [1]

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URLs in this post:

[1] Bloomberg: http://www.bloomberg.com/news/2011-01-31/aaa-rating-tough-to-defend-as-u-s-debt-soars-commentary-by-kevin-hassett.html

[2] Stock up with Fresh Food that lasts with eFoodsDirect (AD): http://www.efoodsdirect.com/

[3] S&P Rating Agency May Soon Downgrade U.S. Debt From AAA: http://www.prisonplanet.com/sp-rating-agency-may-soon-downgrade-u-s-debt-from-aaa.html

[4] Debt Level, Spending Pose Risk to U.S.’s Aaa Credit Rating, Moody’s Says: http://www.prisonplanet.com/debt-level-spending-pose-risk-to-u-s-s-aaa-credit-rating-moodys-says.html

[5] Geithner Vows to Cut U.S. Deficit on Rating Concern: http://www.prisonplanet.com/geithner-vows-to-cut-us-deficit-on-rating-concern.html

[6] Rating Agency Wars 2: The New Evil Empire Strikes Back – Dagong Says Likely To Downgrade US Even If Debt Limit Raised: http://www.prisonplanet.com/rating-agency-wars-2-the-new-evil-empire-strikes-back-dagong-says-likely-to-downgrade-us-even-if-debt-limit-raised.html

[7] America’s Under Water: Debt Equals 103 Percent of GDP: http://www.prisonplanet.com/americas-under-water-debt-equals-103-percent-of-gdp.html

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