Moody's Chief Economist Says Proposed Deal Will Avoid US Downgrade

Tyler Durden's picture

And there you have it. Mark Zandi, better known for predicting at least 18 occurrences of a US recovery in the past 4 quarters, and being as wrong on the shape of the US growth curve as everyone else on Wall Street (although being Moody's head economist that is a perfectly normal track record), just told CNN's State of the Union that the deal is substantive enough to where Moody's will not move to downgrade the US' AAA rating. Naturally, the fact that this is merely another massive can kicking exercise which will see the US debt ceiling raised by $3 trillion with actual cumulative cuts of about $100 billion tops by November 2012 at which point yet another debt ceiling hike will have to be planned is irrelevant. All that matters is to get the S&P back to the year's highs, 120% debt/GDP (same as Greece) be damned.

From Politico:

Former Moody's top economist Mark Zandi says he's quite "excited" by the framework of a debt ceiling deal being discussed on the Sunday shows -- and believes the certainty of substantive deal will lift markets and head-off a downgrade from AAA.


"I'm not in the rating agency... but listening to what they have to say, I think this would be sufficient... but this is substantive and should avoid a big downgrade," said Zandi, adding that some agencies "may go down a different path."


"If the deal collapses, look out, he warned. "If there is any misstep here it will likely undermine confidence and we will likely slip into recession...the economy literally hangs in the balance," Zandi told CNN's "State of the Union."


But if the deal hangs together - a big if, considering the likely opposition of tea partiers -- it's "great news and that gets us very close to fiscal sustainability -- I'm very excited."

Being the apparatchik that he is, and that would fit perfectly in any centrally planned bureaucracy as a D-grade sycophant, he also had the following to add: "The bicameral, bipartisan committee "is a positive step" that will give markets a real sense of certainty on future deficit reduction."

Ah yes, let's leave the future of our country to a "bipartisan committee" whose determinations will be completely ignored when the time comes. Any why not: Obama will have a carte blanche to continue on his present course for another $3 trillion worth of debt.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
bigwavedave's picture

Another year to buy the PM's at hopefully lower prices....

TheFourthStooge-ing's picture

Another year to buy the PM's at hopefully lower prices....

No need to do that. Mark Zandi has also just predicted that flying unicorns will land in my back yard and crap out a pile of 24 karat gold nuggets.


anynonmous's picture

You are being far too hard on Dr. Z, all he's doing is putting his mouth where his money is or trying to make up for supporting Palin


samslaught's picture

Let me get this straight.  The United States can just arbitrarily vote themselves a higher debt limit with no restrictions, then when they sell thier bonds on the open market if nobody wants to buy them the FED just buys up as many as we need them to with no restrictions.  Are you telling me their is an actual agency spending time, effort, reports, analysis, ect. rating whether or not we can pay back this debt.  Is this a joke?  It's honestly the equivalent of rating whether or not the bank will pay you $200 for passing go in monopoly.  In fact it may be more work to get hasbro to print more monopoly dollars than it would be to get the FED to print dollars.

Dollars have no value.  They are actually debt instuments backed by no collateral.  Our debts are denominated in dollars.  This means our creditors hold nothing of actual value.  To print more dollars and pay our debts monthly is not just cheap, it's free.  If we had to back our dollars with something there might be a risk of default on our dollar based debts.  However since dollars are backed by nothing the risk of the United States not printing more funny money every month and sending it to our debtors is zero.

The United States defaulted in 1971.  We promised to exchange our dollars with gold if anyone asked.  Then when it came time to pay up we refused.  We still had some gold too so it was a strategic default.  Wonder if Moody's predicted that one.


All Risk No Reward's picture

>>They are actually debt instuments backed by no collateral. <<

That's where you are mistaken.  The collateral is the ability to extract wealth from American citizens.

Sure. they haven't pulled that care, YET, but they will.  Just ask the Greeks, the Irish, the Spaniards, the Italians, Latin America and the Third World.  We're simply getting a pass for now, but that will end one day.

“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning. The one aim of these financiers is world control by the creation of inextinguishable debt.”

~Henry Ford

samslaught's picture

I agree with you in theory on that point although it's a scam and the Greeks, spaniards, ect. should not fall for it. I believe the Americans won't. The Irish people are putting up quiet a fight. In the end I hope through the power of information the Americans give the banisters the middle finger.

As I have said in other posts their isn't enough money in the world to pay back the central banks with interest. Therefore the banks take our assets slowly like a sick game of musical chairs. Interest on debt based fiat currency = assets. The game is over when they have all the assets.

All Risk No Reward's picture

I am fighting day and night to try and make your belief that Americans won't "fall for it" become reality.

However, we need mroe people hyperfocused on this point because the captured, collaborator media won't ever tell the people the truth.

The central banker box is a fraud and we have to GET OUT of it before we have a chance to prosper as a nation (and I don't just mean material chit).

Dr Bob's picture

Where can i get me one of those unicorns?

StormShadow's picture

ROTFL! It's pretty clear this guy Zandi drinks banker Kool-Aid

Diatribe's picture

Agree.  You can never have too many Prime Ministers in your back pocket.

Husk-Erzulie's picture

Or animated boobie GIFs neither.  That's it then...gonna get me one :-)

Sudden Debt's picture

Maybe another few months but PM's will rise. Gold is at it's current top now but silver will go to 45 by years end.

But that would only be the case if no QE3 would be launched this year because if a QE3 is launched you can add another 20 to 25% to those prices.


scatterbrains's picture

Look at what all that arm flapping is doing to Diatribe's titties.. that's some wind your kicking up there SD or is she just ticklish?

So Close's picture

This should drive PM's higher.  (Perhaps not short term.)  And the dollar lower.   Bullish for money printers, inflation and  Pm's.  Bearish for the return of real GDP growth driven by either productivivty gains or more more goods being produced.   This will stretch the rubberband tighter faster.  The dollar will loose it place as the reserve currency faster, the bond vigalentes will appear sooner, and we are at increased risk of worse inflation.

Caviar Emptor's picture

The Gold (PM) secular bull market is in its early stages, and stretches for as far as the eye can see. Nothing has changed in that regard. Everything they do only confirms it. 

Threeggg's picture

I agree but the MSM has been forecasting a "crash" for weeks now !

PSY-OP for a paper Blizzard to drop PM's to cover all the short's ?

Can you imagine the paper Gold/Silver that has been printed to try and keep PM's down during this joke of a debt deal ? The barrons must cover.

question is who will fall for it ?


docj's picture

Yep. Another year of can-kicking to get my and my family's house in order.

At best.

Mike2756's picture

They're going to have to get another can, 20 years of kicking has demolished the old one.

KickIce's picture

It's a miracle, it's almost like the Fed and Central Banks (one in the same really) are orchestrating this show.

As a matter of fact, they should introduce a 4A rating just for us.

Sudden Debt's picture

In my life, I have only stayed in a 5 star hotel suite 3 times.

once in Bangkok

once in Rome

once in Dubai

In Bangkok, the suite was like a house and it was really fantastic. Servants for everything, everything was top quality and only the best of everything.

In Rome, the hotel was a castle in the center of Rome, service sucked and the interior which was nice was not 5 star hotel like. The food sucked.

In Dubai, they went over each level and when you thouth it couldn't get any better, there was always an extra service available to even raise the bar even more.

Stars for hotels are not the same in every country. The owner pretty much decides what to put on it and the number depends more on the charges they'll ask you.

This is the same for ratings. Countries these days seem to be able to decide how much the will give you as interest on their bonds. They decide the rating and if you don't like it you can take your business elsewhere.


Captain Benny's picture

Let the global markets do the downgrading.  The US-based ratings agencies can't seem to do their job, so once again like in 2008 the market will step in to bitch slap the economy.  This guy is probably a paid shill for the Treasury or some other part of the executive branch.  The more he talks and gets media attention, the more ratings agencies feel compelled to make statements in agreement.  The ratings agencies have no backbones and they just try to go with the consensus, but in this case their "consensus" is not market participants, but instead government affiliated idiots.

wisefool's picture

The Bob Dole method of political branding, comes from the Tip O'Neil era. It was hillarious when that tea party congressman got on the MSNBC Chris Mathews (a former O'Neil Aid, and now the head of thier politcal reporting/progaganda machine)  The congressman started and ended every phrase with "Chris, Chris, Chris" It drove mathews nuts cause he knew that exactly what the MSM was doing to the tea party and this congressman was doing it right back to his geriatric generation of pundits and politicians running around now.



Ratings agencies. Compromise. Future. Ratings agency. Tea party bad. protecting seniors. ratings agencies. grown ups work in the senate. ratings agencies.Moody's. Standard and poors. Obama is reaganesque. Ratings agencies. Senatro Reid. Ratings agencies. Tea baggers are bad. John McCain thinks the tea party are a bunch of hobbits. John McCain is a Patriot. John McCain reads the super important things the ratings agencies say. John McCain is a freind of Bob Dole. Bob Dole is a senator. Ratings agencies are smarter than tea partiers. ratings agencies. Chris Mathews worked for Tip O'Neil. Tip O'neil and Bob Dole have a ratnigs agency called the Bob Dole and Tip O'neil ratings agency. And they don't let tea partiers read the ratings agency reports, especially the ones from pre-2008,

The only thing that matters is thay have to drown out the secret truth that the tax code is how all these politicians get thier rocks off. And the tea party is trying to put them all in tax code central planning rehab. They do not want to go.  So they go to the local ratings agency for another hit.

Ramboy's picture

There are nations with a lower AA rating which have lower interest rates than the US.  The AAA is just a symbolic hegemony.

sunnydays's picture

Amazing if all of us had that ability to just say: I can't afford my mortgage, food, fuel or anything else so the bank gives me a couple of hundred million so I can just blow it on boats, planes and things I absolutely don't need, besides cruises around the world.  Oh my 20 million dollar house too will now get the mortgage paid.  


Yeah, if we could all just get the money give aways that the govt is and will give to the banks. 

Did anyone really doubt there would be a ceiling hike for the banks?  What a game they have all played.  Makes you wonder what was going on that this whole drama purposely made us miss. 

TheFourthStooge-ing's picture

Yeah, if we could all just get the money give aways that the govt is and will give to the banks.

Hey, I know: replace the tax deduction for mortgage interest with a tax deduction for mortgage principal. Even better, allow everyone to print all the legal tender currency they want, just like the banks do.

Did anyone really doubt there would be a ceiling hike for the banks?  What a game they have all played.  Makes you wonder what was going on that this whole drama purposely made us miss.

Whatever the whole debt ceiling charade was supposed to distract us from will no doubt necessitate another episode of debt ceiling matinee by the K-Steet Community Theater within six months.


Crisismode's picture

To legs.


As in just walk away from this whole media circus, this whole artificial construct that the MSM breathlessly regurgitates for mass consumption.

sqz's picture

Speculation about what constitutes a future default is one thing, even to the point where you can argue the US will never technically default, but downgrade in credit quality at this point in time must surely be inevitable if US is treated like any other sovereign. At least that's what every other rating agency seems to have recognised ... What is going on at Moody's?

The lack of transparency with these rating agencies, which hold hostage the world's entire financial system and therefore the world by the balls, is really astonishing!

Caviar Emptor's picture

The rating agencies have succeeded in downgrading themselves. This year, so soon after 2008, was the game changer. Capricious and contradictory ratings have succeeded in creating anger and loss of confidence. Now China and Europe have backed their own rating agencies in retaliation, thus obscuring the focus and diluting the brands. Look for further warfare and scandals. Their best days are now way behind them. Their future is increasingly uncertain

Pay Day Today's picture

So is this guy Zandi Moody's chief economist...or Moody's former chief economist?

What a mess_man's picture

Here we go. Get ready for the economic "recovery parade" to be rolling once again tomorrow morning. Preparations are going just as planned...

What a mess_man's picture

Here we go. Get ready for the economic "recovery parade" to be rolling once again tomorrow morning. Preparations are going just as planned...

PulauHantu29's picture

I don't trust Moddy's and S%P anymore after they rated the Subprime Garbage triple AAA. It's better for an investor to read the solid fincial blogers.

lizzy36's picture

Ahhhh leave it up to Zandi, to still be trying out for head economic cheerleader of the US:Treasury Secretary.

Now, there is no plan, there is some broad framework. With about 1/4 of the revenue cuts that S&P was looking for.

And this is good enough?

Moody's is awesome. On friday they did say they didn't care what the deal for the deficit looked like, they only cared that the debt ceiling was lifited. This was the only thing NECESSARY for US to avoid downgrade.

And that they would only downgrade after the US defaults.

And exactly what purpose does Moody's serve again?  Bueller....Bueller.

In other news LEH and Enron have both been downgraded today.

cswjr's picture

Don't forget that for Moody's only failure to pay interest/principal constitutes default.

GeneMarchbanks's picture

'And exactly what purpose does Moody's serve again?  Bueller....Bueller.'

To perpetuate the Status Quo. Moody's: We are here to make sure you don't break the economic suicide pact. Cultish. Remember they are objective. Like, for example, let's downgrade places where we don't live and when it comes to rating our own shit we'll slap a triple AAA on it. All with a little theater to make sure the outcome looked uncertain. Wheww! That was close.



mynhair's picture

The TASE sure wet the bed today.  Must be the 'wet blanket' syndrome.

RobotTrader's picture

<--Mark Zandi yet again attains "Rock Star" status

<--Diane "Lip Gloss" Swonk nowhere to be found


Yet again, Mark Zandi has just guaranteed himself more prime time appearances on CNBC and Bloomberg.

Another opportunity to hop in the sack with Trish Regan or Dierdre Bolton to unload a pearl necklace.

While Diane Swonk continues to morph into another version of Liz Taylor (RIP) and troll the Chicago lakefront looking for 35-year old playboys with fetishes of having sex with surrogate mothers.

Cdad's picture

Banana Republic, my brothers.  A vote of no confidence for Tea Party members trying to hold tight to real fiscal restraint.  This will destroy the Republican party for another decade. Goodbye Speaker Boehner. 

Bring on the Super that the madness can continue while only Congressmen in safe districts recommend superdee duper cuts that will never come.  

If this is what comes to pass, and Moody's fails to act, welcome to rising interest rates coming to a neighborhood near you via the enforcement of the actual market.  Failed Treasury auctions here we come.

Maximum bullshit now being breached...over the boots and up to the gums.  

Hulk's picture

Its time once again Cdad, for a Dr WIlliam Black lecture on fraud as the basis for this crisis

EVERYBODY needs to watch this in order to understand why we are experiencing this crisis and the HUGE  role the credit ratings agencies  play in this.

Its an "epidemic of fraud" Bitchez...