Moody's Sells Out As Usual: Leaves US At AAA, Puts Outlook On Negative Not To Appear Overly Corrupt Or Incompetent

Tyler Durden's picture

As that uber-sycophant, Mark Zandi (who has yet to be right about one thing in his entire career), put it so well a few days ago, when discussing the deal that will bring the US to 110% debt/GDP within a year "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." Sure enough, the former Moody's top "economist" certainly knows his own, and as of several minutes ago Moody's has confirmed it will not touch America's AAA rating. However, it will put the rating outlook on negative. That should shut them up. Full report of how to sell out like the best of them is attached. And the kicker: "Moody's has also confirmed the Aaa ratings of certain US government-guaranteed bonds issued by the governments of Israel and Egypt, which had been on review for possible downgrade as a result of the review of the US government's bond rating." Well at least America's direct protectorate states (as opposed to its indirect ones) can sleep well.

From Moody's

Moody's Investors Service has confirmed the Aaa government bond rating of the United States following the raising of the statutory debt limit on August 2. The rating outlook is now negative.

Moody's placed the rating on review for possible downgrade on July 13 due to the small but rising probability of a default on the government's debt obligations because of a failure to increase the debt limit. The initial increase of the debt limit by $900 billion and the commitment to raise it by a further $1.2-1.5 trillion by yearend have virtually eliminated the risk of such a default, prompting the confirmation of the rating at Aaa.

In confirming the Aaa rating, Moody's also recognized that today's agreement is a first step toward achieving the long-term fiscal consolidation needed to maintain the US government debt metrics within Aaa parameters over the long run. The legislation calls for $917 billion in specific spending cuts over the next decade and established a congressional committee charged with making recommendations for achieving a further $1.5 trillion in deficit reduction over the same time period. In the absence of the committee reaching an agreement, automatic spending cuts of $1.2 trillion would become effective.

In assigning a negative outlook to the rating, Moody's indicated, however, that there would be a risk of downgrade if (1) there is a weakening in fiscal discipline in the coming year; (2) further fiscal consolidation measures are not adopted in 2013; (3) the economic outlook deteriorates significantly; or (4) there is an appreciable rise in the US government's funding costs over and above what is currently expected.

First, while the combination of the congressional committee process and automatic triggers provides a mechanism to induce fiscal discipline, this framework is untested. Attempts at fiscal rules in the past have not always stood the test of time. Therefore, should the new mechanism put in place by the Budget Control Act prove ineffective, this could affect the rating negatively. Moody's baseline scenario assumes that fiscal discipline is maintained in 2012, despite pressures for fiscal relaxation that often precede general elections and the difficult negotiations that are likely to arise due to the scheduled expiration of the so-called "Bush tax cuts" at the end of that year.

Second, further measures will likely be required to ensure that the long-run fiscal trajectory remains compatible with a Aaa rating. Specifically, Moody's expects to see a stabilization of the federal government's debt-to-GDP ratio not too far above its projected 2012 level of 73% by the middle of the decade, followed by a decline. Such a pattern would also support a smaller interest burden as a percentage of government revenues than is now projected. Wide political differences that have characterized the recent debt and fiscal debate, if they continue, could prevent effective policymaking around that time. Measures that further reduce long-term deficits would be positive for the rating; a lack of such measures would be negative.

Third, recent downward revisions of economic growth rates and the very low growth rate recorded in the first half of 2011 call into question the strength of potential growth in the coming year or two. Continued very low growth would make fiscal consolidation more difficult. As a result, Moody's will also be monitoring the pace of growth as it relates to the fiscal effort.

Finally, the US Treasury's cost of borrowing has remained low despite the recent political uncertainties surrounding the debt limit and the long-term fiscal outlook. While Moody's and economic forecasters generally expect interest rates to rise over the next few years, a rise in borrowing costs above and beyond what is now expected would threaten efforts at fiscal consolidation. Such a development would also be negative for the rating should it occur.

Moody's has also confirmed the Aaa ratings of certain US government-guaranteed bonds issued by the governments of Israel and Egypt, which had been on review for possible downgrade as a result of the review of the US government's bond rating.

The implications of this rating action for directly and indirectly related ratings will be reported presently through a separate press release.

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swissinv's picture

well no suprise with Moody's - now I wonder if S&P has the balls to!

CH1's picture

S&P will cave too. Anyone who wants respect from the masses always caves to the state.

trav7777's picture

are you tards paying attention to the TLT?  I mean, shit bonds been goin up up you can call these types of yields OTHER than AAA is beyond me.

The ridiculous yields of USTs warrant a AAAA rating, IMO.  And, yes, I am fully aware that we are fuckin bankrupt.  The market will set the paper price, fuck the raters.

dwdollar's picture

Come on now.  America won't be AAA forever.  The rating agencies will give you fair warning of AA status a full 2-4 hours before financial armageddon and complete collapse into a Mad Max scenario.  Just don't make the mistake of being asleep more than 4 hours at a time.

Raymond Reason's picture

Just don't make the mistake of being asleep more than 4 hours at a time.

Good strategy.  I think i'll see if i can get on Moody's email notification list. 




Tanz der Lemminge's picture

Doesn't Moodys still have Confederate war bonds rated Aaa?

Al Gorerhythm's picture

Are they including tranches of BBB and CCC sub-prime treasuries into the mix and rating them AAA regardless ...... AGAIN? 

knukles's picture

Charades:  Smells like....

MsCreant's picture

And Gold still climbs...

TSA Thug's picture

Well yea it does. You should have heard Rush and Hannity today. They were on fire! Repubs(with means) who object to the passage of the bill are going to put pressure on the markets. Hannity had a guest on today telling listeners to buy used cars!

Holy Smoke MsCreant. Fireworks before my very eyes! They are going to force the second down leg using various media and subversive messages.


trav7777's picture

used cars are harder to find due to Cash for Clunkers, where they junked a lot of the potential used car supply.

Another dipshit program from Obama

StychoKiller's picture

Hmm, I wonder if could get a collector to part with a Deusenberg (Speling?) for some AU...

Ratscam's picture

the debt is transitory

knukles's picture

The Empire is transitory.

swissaustrian's picture

Moody´s stock is still up arround 20 % this year...

unky's picture

The economic outlook already deteriorated... The S+P 500 dropped below 1250

TwelfthVulture's picture

Now that they got the debt ceiling raised they can concentrate on getting QE3 started.  Can't do that with indices at multi year highs.

smlbizman's picture

the 3 mos. libor keeps going and going and going......won't be long

Rodent Freikorps's picture

So the ECB was right when they called the rating agencies corrupt, criminal, lying dens of cheap prostitutes?


Yen Cross's picture

  And that was " Candy coated".   +1

Rodent Freikorps's picture

I'm trying out my kinder, gentler, imperial executioner persona.

knukles's picture

Dens of cheap prostitutes?
Warren Buffet still owns one of them brothels! 

Pay Day Today's picture

These ratings agency prostitutes are NOT cheap.

CH1's picture

Insert "takes one to know one" here, but yeah, theyt were right.

huckman's picture

Hey Moody's- What's our consolidated sum total "liquid asset"? 

Temporalist's picture

And the CNBS teams are saying "We've been long on silver for a long time" and Cramer just said gold has a long way to run as only 1.5% of people hold gold.  Cramer said gold about 1660 times.

Yen Cross's picture

  Cramer is TURD BURGLER on a wafffle iron...   





                                                                   Watch him silzzle in SOROSVILLE!!!

Rodent Freikorps's picture

So, gold is about to be pimp slapped all the way to the sub-basement?

Yen Cross's picture

 Leading indicators...  SPX, RBA, DXY.... Stay sharp!

drchris's picture

Zandi was probably the biggest winner in the dept ceiling debacle.  AAA can't be cheap.

hambone's picture

Don't walk - RUN to buy more gold and silver...the farce is becoming too blatant for even the most self absorbed American to notice (ok, that's not true, as they are on their i-pad, pod, w/ $800 Skullcandy earphones)...but maybe their parents will start catching on (ok, that's not true either) way Americans will notice a fucking thing till long after the smell of smoke has passed and finally flames are leaping around them...then, maybe then, they'll get it.

Sudden Debt's picture

I wonder how they'll rate the US when rates are at 15% on the 10yr.


knukles's picture

Rate the US?  Nobody's gonna be left alive when rates go to 15%.  Hell, the whole fucking world's current debt burdens are barely servicable at current rate levels.... re: Greece, et. al....
And all the solutions worldwide to too much debt are to take on more debt?
This don't work in the end.

Yen Cross's picture

S/D Watch the  cyn/usd revalue...  The truth is right in front of us...!

fishface's picture

well, the Egyptian 3yr is almost there, same rating and guaranteed by by the same Mob.


bigdad06's picture

Moody's is not going to downgrade the debt rating unless they get the go ahead from JP Morgan and GS, who will be short treasuries of course. Check out the new video here .

knukles's picture

OK.  I’m gonna tell you somethin’.  Good Old Boy Warren Buffet’s Moody’s Invented Rating Services tries so much as to seriously fuck with the AAA of the Good Old United States of America anymore, gonna be some conversation like this from Pulp Fiction, with Timmah a-jumpin’ ‘round in the Gimp Suit screamin’ that Warren’s effective tax rate is not fucking gonna so much as see that of his secretary's on it’s way to 117%, retroactive to pre-1492, but his ass is gonna be way long time in front of so fucking many congressional committees he ain’t never ever gonna see Omaha Fucking Steak City Nebraska AAAgain in his life time.



Butch: You okay?
Marsellus: Naw man. I'm pretty fuckin' far from okay.
Butch: What now?
Marsellus: What now? Let me tell you what now. I'ma call a coupla hard, pipe-hittin' niggers, who'll go to work on the homes here with a pair of pliers and a blow torch. You hear me talkin', hillbilly boy? I ain't through with you by a damn sight. I'ma get medieval on your ass.
Butch: I meant what now between me and you?
Marsellus: Oh, that what now. I tell you what now between me and you. There is no me and you. Not no more.


doomandbloom's picture

haha....all is return to your posts peasants! breaks over.

caerus's picture

we're triple a see...and we'll remain triple a understand..see...

Rodent Freikorps's picture

Edward G. Robinson always creeped me out.

Madcow's picture

When is a crisis reached? When questions arise that can't be answered. 
- Ryszard Kapuscinski 

CompassionateFascist's picture

Did not know that US "guarantees" Israeli debt paper. Not surprised, tho. As usual, tail wagging dog.

andybev01's picture

I was wonderin' where all the joo haters were hiding.

Rodent Freikorps's picture

They are busy getting in shape for the annual fall Intafada season.

Gotta burn off that glossy look from living off western welfare for most of the year.

Homey Da Clown's picture

Is it difficult to type with that hood on?

caerus's picture

fuck this looks like a the gaps on Au and Ag...

Cult of Criminality's picture

I like trading gaps especially when they gap down in an uptrend because it will close the gap and usually keep climbing overshoot  then sometimes you get a short short in AU or AG even better.