Moody's Warns That Any Fluff Deficit Reduction Plan Will Likely Result In Downgrade

Tyler Durden's picture

Since we don't have minutely Europe headlines, instead we get US ones. And here is the first official reaction to the McConnell plan from a rating agency. Since this Plan B is far more concrete than the Gang of Whatever Plan, Moody's will have absolutely the same to say about the previously noted 5 page talking points memo.

From Reuters:

A U.S. government backup debt plan to raise the country's debt ceiling and avoid imminent default could still lead to a downgrade of U.S. ratings in the next year or so, Moody's said on Tuesday.

Senator Mitch McConnell's "Plan B," increasingly seen as a "Plan A" in Washington, would avoid any immediate downgrade of the coveted U.S. triple-A rating, Moody's analyst Steven Hess told Reuters in an interview.

"But the numbers that are being discussed in terms of any possible deficit reduction coming out of this plan don't seem to be very large," Hess said. "Therefore this plan might result in a negative outlook on the rating."


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slaughterer's picture

Moody's does not like it, bitchez!

eureka's picture

 - but US stocks love it...., bitchez?

jus_lite_reading's picture


RALLY!!! Because the more they rally the more my gold and silver will be worth when the big wet shit hits the giant fucking shit fan!!! 

TaxSlave's picture

All your money is debt.

All your base are belong to us, you curs!

10kby2k's picture

the housing market makes sense to me
the commodities market makes sense to me

all of the rest of it i have absolutely no comprehension on wtf is going on

redpill's picture

Moody's has become a rather schizophrenic organization.  On one hand they release laughably pollyanna economic projections, and meanwhile their credit risk group waggles their fingers at governments over catastrophic sovereign debt levels.  So we're either on the cusp of economic boom, or we're totally fucked.  I guess that's one way to make sure you can look back and say you were right.

LookingWithAmazement's picture

"negative outlook" - who cares? Europe on the brink, China overheated and in for a major correction, US economy sluggish. Mark my words: there will be a *major run* into the US T-bonds as soon as the first auction is announced. People will be dying to park their money over there. And Bernanke plus Obama will be laughing to death.

Popo's picture

I sure wish these guys had miraculously decided to stop being pussies back in 2006.

101 years and counting's picture

didnt DONK force the ratings agencies to be 'credible'? 

papaswamp's picture

In the next year or so...the politicians can live with that. Heck upwards of a 2 yr big deal.

SheepDog-One's picture

All these financial headlines that say '12-18 months from now' actually mean 'within the next week'.

papaswamp's picture

I'd be impressed, but I don't think Moody's has the balls. I think it will just say bad US bad! and then go pick on Spain. 

nedwardkelly's picture

In the next year or so.

Right, that's one or more of:

1. A commitment to do something so far beyond the average idiots attention span that it's irrelevant

2. As meaningless as the classic pub sign that says "Free beer tomorrow"

3. If remotely close to a committed time frame, just beyond the next elections, but close enough after not to mess with the next round.

For the TLDR crowd:

4. BS.


ebworthen's picture

They just need to downgrade it already because the U.S.A. is junk because our leaders in Government and Business have sold us out and sooner or later there will be a mutiny on the U.S.S.A. slaver ship.

Peter_Griffin's picture

Fuck yeah, throw us a fuckin bone moodys.  My temp is 213*, I'm ready for some real fuckin change.

Mactheknife's picture

Ron Paul seems to be the only guy there who gets it...on Cut, Cap, & Balance:

First, it purports to eventually balance the budget without cutting military spending, Social Security, or Medicare.  This is impossible.  These three budget items already cost nearly $1 trillion apiece annually.  This means we can cut every other area of federal spending to zero and still have a $3 trillion budget.  Since annual federal tax revenues almost certainly will not exceed $2.5 trillion for several years, this Act cannot balance the budget under any plausible scenario.

Second, it further entrenches the ludicrous beltway concept of discretionary vs. nondiscretionary spending.  America faces a fiscal crisis, and we must seize the opportunity once and for all to slay Washington's sacred cows-- including defense contractors and entitlements.  All spending must be deemed discretionary and reexamined by Congress each year.  To allow otherwise is pure cowardice.

Third, the Act applies the nonsensical narrative about a "Global War on Terror" to justify exceptions to its spending caps.  Since this war is undeclared, has no definite enemies, no clear objectives, and no metric to determine victory, it is by definition endless.  Congress will never balance the budget until we reject the concept of endless wars.

Finally, and most egregiously, this Act ignores the real issue: total spending by government.  As Milton Friedman famously argued, what we really need is a constitutional amendment to limit taxes and spending, not simply to balance the budget.  What we need is a dramatically smaller federal government; if we achieve this a balanced budget will take care of itself.

Read more:

EscapeKey's picture

Ron Paul is a fucking hero.

By capping spending at a certain constant percentage of GDP, it allows for federal spending to continue to grow. Tying spending to GDP creates an incentive to manipulate the GDP figure, ... In the worst case, it would even reward further inflation of the money supply, as increases in nominal GDP through pure inflation would allow for larger federal budgets.

Uncle Remus's picture

it purports to eventually balance the budget without cutting military spending, Social Security, or Medicare.  This is impossible.


Nut. Shell.

SheepDog-One's picture

Yea WTF do they mean 'within a year', its NOW! 

Smiley's picture

Why do we care what Moody's says?  Didn't they rate subprime mortgage derivatives AAA+?

PaperBugsBurn's picture

Because "Moody's" are the banksters.

the not so mighty maximiza's picture


dracos_ghost's picture

At first glance, it looked like the headline said "... Any Fluffer reduction plan will likely result in downgrade".

Moody's: "Keep my fluffers in budget or I'll downgrade you".

TaxSlave's picture


It's not my debt.  And I'm not paying it!

MethodMan's picture

We don't have to, they print money and give it to debt holders. We pay for it, whether we like or not. The value of our money is the only thing that is going to get repudiated.

TaxSlave's picture

Sigh .... I know.

But as they do that, ever less real wealth gets created for them to skim off ... and eventually all bondholders that can't print money will begin to worry about whether they'll get paid off.

Then the bond market goes poof.  And the currency with it.

There ... repudiated!

Then we'll get a New Money, backed by gold (in a basket with fries, maybe), except you can't have any of the gold and it gets issued as .... debt.  That you owe.  Forever.

chdwlch1's picture

How can our "New Money" system survive when it's backed by nothing but "tradition"?

/sarc off/


Doyle Hargraves's picture

I like them french fried potaters-Karl Childers

TruthInSunshine's picture

How dare Moody's.

They would have gone bust had it not been for the AIG bailout, as they were a big part of Warren 'Thank You Uncle Sugar' Buffet's Berkshire holdings (as were many other intended beneficiaries of taxpayer bailouts that Buffet held, with or without counterparty risk made moot by Uncle Sugar).

Doyle Hargraves's picture

Are these guys are even relevant anymore?! Hello AAA rated junk mortgages and CDOs?! The US should have been downgraded a decade ago... gold and silver never have to rely on ratings because they are real wealth bitchez!

HungrySeagull's picture

Warn warn warn warn.

Just put up or shut up Moody.

Quintus's picture

Yup.  All talk and no trousers.  Let's see some genuine downgrading action.

francis_sawyer's picture

In similar news...

Oscar the Grouch warns the Sesame Street producers that if they don't start adding more minutes to his segments, then he's going to take his acting talents elsewhere...


carbonmutant's picture

Somehow I don't think our "community organizer" is paying attention to Moodys et al.

problemfixr's picture

I wonder how long the masters of this world are going to continue to let groups like Moody's propagate this extreme truth?  Moody's needs to just move along...nothing going on here.

TruthInSunshine's picture
There's the headline for the day. The poisonous pact is a fait accompli. Fade it.

SheepDog-One's picture

Well Mr McConnell, Chinas Dagong says US is already defaulted, so apprently they think its even more than an 'option' really a present reality.

Dagong Rating Agency: "The US Has Already Defaulted" | zero hedge

Dick Darlington's picture

Same mantra as in Europe. We are broke, we can't pay our debts, we run huge deficits in order to chase the failed infinite growth utopia and to support the massive rotten waste in private balance sheets BUT default is not an option. I seriously question the mental health of anybody outside the political/financial elite who still believes in the "system".

TruthInSunshine's picture

There's the headline for the day. The poisonous pact is a fait accompli. Fade it.

  • 07-19 14:30: US Senator McConnell says default is not an option
  • And Reid slams the alley-oop for the financial torch job.

    "Pull it," says the government.

    Sudden Debt's picture




    cosmictrainwreck's picture

    CURB YOUR ENTHSIASM! and quit flailing around like that - ya look silly

    Sutton's picture

    Just like the Titanic could not be saved after it's sixth(?) compartment flooded, so the Old Republic can't be saved.

    Just a question of when we sink beneath the waves.

    Bay of Pigs's picture

    Fluff that soft patch for all its worth.