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Moody's Issues Credit Update Of United States

Tyler Durden's picture




 

New York, December 22, 2011 -- The following release represents Moody's Investors Service's summary credit opinion on the United States of America and includes certain regulatory disclosures regarding its ratings. This release does not constitute any change in Moody's ratings or rating rationale for United States of America.

Moody's maintains the following ratings on United States of America, Government of

  • Long Term Issuer (domestic and foreign currency) ratings of Aaa
  • Senior Unsecured (domestic currency) rating of Aaa

RATINGS RATIONALE

Moody's Aaa government bond rating is based on the very high degree of economic, institutional strength, and government financial strength, and low susceptibility to event risk. Although government financial strength weakened as a result of interventions to support the financial system and the economy, the basic factors supporting the Aaa rating remain intact.

The US is the world's largest economy and is still the center of global trade and finance, supported by flexible markets and open trade and financial regimes. Over time, American economic competitiveness has been reinforced by fairly rapid productivity growth, a high degree of technological innovation, and generally sound public finances. Recently, prospects for some of these factors have deteriorated, most notably government finances. These finances have been substantially worsened by the credit crisis, recession, and government spending to address these shocks. The ratios of general government debt to GDP and to revenue deteriorated sharply during the crisis and are now near the top end for Aaa-rated countries. The federal government debt ratios, which Moody's considers relevant to the rating given the US's relatively decentralized fiscal structure, rose steeply and will continue their upward trend under current policies.

Despite high debt levels, the financeability of the US federal government debt remains high, in part due to the global role of the US dollar. This has been demonstrated during the course of 2011, with the yields on Treasury securities falling to near-record lows at times. Over the longer term, this role could be eroded, but Moody's sees no immediate threat to the US government's ability to continue to access financing at relatively low cost.

Rating Outlook

The rating outlook is negative. Structural fundamentals, political stability, and post-crisis economic prospects support a Aaa rating. However, the outlook was changed in negative in August 2011 because of the risks of a continued rise in federal government debt ratios over the medium term, despite the recent passage of the Budget Control Act, which will result in some deficit reduction over the next decade. Without further deficit reduction measures, the rating could be placed on review for downgrade sometime in the coming year or two.

What Could Change the Rating - Down

If the upward trend in projected debt ratios and interest costs continues, and further measures beyond the recent agreement to stabilize and ultimately reverse them are not put into place, the rating could eventually move down. The individual measures are less important for the rating than the actual deficit and debt levels that would result, although it is likely that over the longer term entitlement reform will need to be part of any substantial fiscal reform. In addition, downward pressure on the rating could develop as a result of lower economic and employment growth rates than now expected.

The principal methodology used in this rating was Sovereign Bond Ratings published in September 2008. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

 

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Thu, 12/22/2011 - 23:44 | 2006330 PicassoInActions
PicassoInActions's picture

so no downgrade from moodies. that's cool, not that it matters

Thu, 12/22/2011 - 23:57 | 2006360 earleflorida
earleflorida's picture

just cut all entitlements and you'll be alright,... as our POTUS has done today by getting a temp. payroll tax cut - further gutting [backdoor] social welfare programs. 

ironically,... it is a democratic [closet far-right???] that could have the audacity to pull this off with the flock yet to be shorn for the winters' snow-job come permanent, 'permafrost'!

Fri, 12/23/2011 - 01:44 | 2006511 tyler
tyler's picture

What is the definition of entitlement?  Some people are entitled to the tens or hundreds of thousands they put into social security.  If entitlements is a nice way to describe welfare then your issue is with the states.  But that issue has already been solved due to loss of tax revenue in this recession.  The poor, disabled and elderly are always first on the chopping block.  Instead of me getting upset at somebody who a couple years ago was living on two hundred dollars a month, I take issue with foreign aid, the rebuilding then the rebuilding of afghanistan.  The fed bailing out the world, TARP never ending and the constant bailouts of fannie and freddie, just to name two.  It might make people feel superior to say cut entitlements but in this economy we need to help individuals who can't catch a break instead of propping up failing institutions and letting bankers run wild.  If you don't take issue with the income inequality in this country then disregard everything I just said and give me a thumbs down.  

 

 

Fri, 12/23/2011 - 10:49 | 2006947 Hard1
Hard1's picture

Dear all at Moody's:   It's CREDIT rating, you morons not a beauty contest of how wonderful the country is and how strong it's credit funded institutions are.   Well, when your largest shareholder thinks you are AAAA it would obviously pose a huge carreer risk to consider any CREDIT metrics.  Have a happy holiday and a less biased 2012 pleeeeeeezzz!

 

PS: A few metrics could include such obvious things as Debt/GDP, Deficit/GDP and a projection of how fast the former one is growing at the pace that you are getting deeper into debt as indicated by the latter.  I recommend using reasonable GDP expected growth rates and not hopium induced as the CBO does.

Sat, 12/24/2011 - 00:47 | 2008840 ThrivingAdmistC...
ThrivingAdmistCollapse's picture

This is all just propaganda at this point.  The government, moody's and most banks are simply trying to prevent a full scale economic collapse.

Fri, 12/23/2011 - 09:55 | 2006835 BigJim
BigJim's picture

If 'entitlements' includes all bailouts, you're on the right track.

Fri, 12/23/2011 - 00:10 | 2006389 Silver Bug
Silver Bug's picture

Another bad joke from Moody's, U.S paper should be rated Negative Junk.

 

http://silverliberationarmy.blogspot.com/

Fri, 12/23/2011 - 00:59 | 2006475 SHEEPFUKKER
SHEEPFUKKER's picture

Quadruple A bitchez.  Keep stealing, errrrrrrr, borrowing trillions more dollars. 

Fri, 12/23/2011 - 09:56 | 2006840 BigJim
BigJim's picture

...but Moody's sees no immediate threat to the US government's ability to continue to access financing at relatively low cost.

ie, as long as the Fed sees fit to nationalize the yield curve?

Very insightful, Mr. Moody (if that IS your real name)

Thu, 12/22/2011 - 23:45 | 2006333 navy62802
navy62802's picture

Until it's not Aaa. The credit ratings agencies retain no credibility in the aftermath of the 2007/2008/2009 crash. I don't, on the basis of sound logic, understand why anyone listens to what these people have to say about the creditworthiness of an ant, let alone a sovereign nation.

Fri, 12/23/2011 - 09:59 | 2006846 BigJim
BigJim's picture

The ratings agencies don't get listened to because they have any credibility. They get listened to because their ratings effect (and affect) the value of securities as collateral and, consequently, everyone's balance sheets.

Thu, 12/22/2011 - 23:45 | 2006337 Fidel Sarcastro
Fidel Sarcastro's picture

A $trillion in debt? $10trillion?  $15trillion?  $115TRILLION?  Come on boys (what does it matter): It's all ballbearings now-a-days!

 

No worries - Fletch.

Thu, 12/22/2011 - 23:47 | 2006340 Snakeeyes
Snakeeyes's picture

And now that Geithner has guaranteed Fannie and Freddie debt, the US is on the hook for GSE debt too. Which happens to be almost as big as Federal debt. And was BIGGER than Federal debt for a while. Look at the chart HERE:

http://confoundedinterest.wordpress.com/2011/12/16/housing-starts-and-ho...

Still think we are solvent? Now add in Social Security, Medicare, Medicaid, etc. and we are Greece e^100!

Fri, 12/23/2011 - 00:05 | 2006374 earleflorida
earleflorida's picture

ss [1933-45/ fdr] and medicare [1963-69/ lbj] were defined benefit programs until johnson started pilfering/ robbing[?] the piggybank

social security is still solvent, period!

jmo

Fri, 12/23/2011 - 10:00 | 2006851 BigJim
BigJim's picture

But... but... we only owe it to ourselves, right?

Thu, 12/22/2011 - 23:52 | 2006349 Caviar Emptor
Caviar Emptor's picture

Knowing us, the lack of a downgrade ensures no action will be taken.

Thu, 12/22/2011 - 23:54 | 2006351 Manthong
Manthong's picture

Time to put  the juice in the Santa rally..

http://i43.tinypic.com/15fgltl.jpg

 

Thu, 12/22/2011 - 23:56 | 2006356 dick cheneys ghost
dick cheneys ghost's picture

How does one rate moral Bankruptcy?

Fri, 12/23/2011 - 00:08 | 2006380 Schmuck Raker
Schmuck Raker's picture

On a bell curve.

Fri, 12/23/2011 - 00:10 | 2006382 earleflorida
earleflorida's picture

'five sodomite golden-stars' 

Fri, 12/23/2011 - 05:17 | 2006629 swoop72
swoop72's picture

love me some moral bankruptcy quotes.

its like the ultimate civilized cutdown. you are morally bankrupt.

Fri, 12/23/2011 - 10:02 | 2006856 BigJim
BigJim's picture

Don't worry, the Fed is working on how it can to recap banks' moral balance sheets.

Thu, 12/22/2011 - 23:57 | 2006361 Caviar Emptor
Caviar Emptor's picture

Another bill for ya: 

US seeks program to buy up missiles loose in Libya

http://www.nytimes.com/2011/12/23/world/africa/us-seeks-program-to-buy-u...

Fri, 12/23/2011 - 10:08 | 2006876 BigJim
BigJim's picture

I'll bet the Taliban would LOVE to get hold of a few hundred of those.

Fri, 12/23/2011 - 00:26 | 2006410 Eireann go Brach
Eireann go Brach's picture

Dear rating agencies, we bring in $2.1 trillion in revenue and spend $3.8 trillion, we deserve to be AAA because we only need to borrow and print $1.5 trillion!

Sincerely

Timmay turbo tax Geitner

Fri, 12/23/2011 - 00:28 | 2006416 PulauHantu29
PulauHantu29's picture

As revenues sink how do liabilities (such as the exploding trade deficit) get paid?

Print.

Fri, 12/23/2011 - 00:45 | 2006451 Bansters-in-my-...
Bansters-in-my- feces's picture

"Who's your Daddy"   Moodys.....

The USA is one fucked place.

Fri, 12/23/2011 - 00:58 | 2006472 ForWhomTheTollBuilds
ForWhomTheTollBuilds's picture

"Over the longer term, this role could be eroded, but Moody's sees no immediate threat to the US government's ability to continue to access financing at relatively low cost."

 

And so we see here that the inability of rating agencies to act until days before bankruptcy is no accident.  It is by design.

Fri, 12/23/2011 - 01:10 | 2006484 DoubleTap
DoubleTap's picture

"If the upward trend in projected debt ratios and interest costs continues,"

 

IF??? hahahahahahahahahahahaha

 

Oh wait, .gov passed the Budget Control Act. .Gov has remedied that problem. Looks like I laughed too soon.

Fri, 12/23/2011 - 01:32 | 2006501 Divine Wind
Divine Wind's picture

This is just another confirmation that the entire system is gamed.

Spell it out in English;

While the Euro is in Fuckedville, the U.S. dollar/ treasuries is the only place for institutional money to land. For the short term players, this is your sandbox. Play hard, make a pile of FRNs and convert.

After that, what is left of the U.S. dollar will come into the crosshairs.

Fri, 12/23/2011 - 05:20 | 2006631 swoop72
swoop72's picture

ok then, shouldnt european oddsmakers be a lil pissed about betting on a fixed fight?

Fri, 12/23/2011 - 01:56 | 2006523 sitenine
sitenine's picture

Debt to GDP over a 100% with no relief in sight.  Irrelevant.

Fri, 12/23/2011 - 02:13 | 2006535 cranky-old-geezer
cranky-old-geezer's picture

 

 

Over the longer term, this role could be eroded, but Moody's sees no immediate threat to the US government's ability to continue to access financing at relatively low cost.

"Eroded" as in MF Global "eroded", i.e. virtually overnight?

And just like MFG, outsiders will do it ...virtually overnight?

When USD collapses it'll be virtually overnight, and other nations will do it.

That's why rating agencies are meaningless at the sovereign debt level.   At that level, when big things happen, they happen fast, catching everybody off guard ...except insiders of course ...which doesn't include rating agencies.

And they're pretty much meaningless at the corporate level where companies go tits up virtually overnight too ...as Bear Stearns, Lehman, and now MFG showed us.

Can anyone think of any time in recent history where a rating agency gave ANY warning of an impending bankruptcy?

Fri, 12/23/2011 - 02:14 | 2006548 ffart
ffart's picture

Moody's to US government: Everything's gonna be totally fine

http://www.youtube.com/watch?feature=player_embedded&v=hNz0kdGLX-E#!

Fri, 12/23/2011 - 02:36 | 2006557 Assetman
Assetman's picture

I'm curious what sort of rating the major agencies would give for the Federal Reserve's balance sheet.

I mean it's only $2.5 trillion and counting.

Silly me... all that junk on their B/S is guatanteed by the AAA U.S. Gubbmint.

 

Fri, 12/23/2011 - 10:10 | 2006880 BigJim
BigJim's picture

As long as they don't run out of bytes, the Fed will be fine.

Fri, 12/23/2011 - 02:48 | 2006565 Milton Waddams
Milton Waddams's picture

reserve currncy will be the most goofgle trends of the year

Fri, 12/23/2011 - 03:29 | 2006577 lolmao500
lolmao500's picture

So basically saying that foreign investors are so fucking retarded, the scam will continue for some more... totally agree with Moody.

Fri, 12/23/2011 - 04:28 | 2006597 Clowns to the l...
Clowns to the left_ jokers to the right's picture

"Moody's sees no immediate threat to the US government's ability to continue digging themselves a deeper hole and leaving its citizens with an even bigger bag of shit to hold."

Fixed.

I seem to remember a time not long ago where being able to obtain credit cheap and easy regardless of the ability to pay it back turned out to be less than a good thing. Something to do with houses or the like, interest rates, ah hell....I don't know. Of course, I'm not an employee for a magical, super-duper, grade A, uber-special ratings agency.

F the assholes and the fountain pens they rode in on.

Fri, 12/23/2011 - 07:05 | 2006669 Zero Govt
Zero Govt's picture

The USA's credit rating is AAA

Appalling, Anal, Apocalyptic

pass the popcorn, i always enjoy the 'skill' of watching Credit Rating Agencies sugar coat turds.. these CRA guys should be on Hells Kitchen and see what Gordon Ramsey has to say!

Fri, 12/23/2011 - 08:01 | 2006693 Bullwinkle Moose
Bullwinkle Moose's picture

Moodys knows what side their bread is buttered on.

Fri, 12/23/2011 - 08:05 | 2006698 papaswamp
papaswamp's picture

Question.... Congress passed this new temporary whatever and the US debt is again bumping up against the debt ceiling...is a debt ceiling hike hidden in the agreement somewhere?

Timmay has had to do some pretty amazing accounting to keep the debt 'subject to limit' below the mark. He is now ~$100 Bil away from the ceiling...that is less than a months over spending

Fri, 12/23/2011 - 09:40 | 2006807 Fuh Querada
Fuh Querada's picture

I misread "update" as "upgrade"

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