Moody's Warns Washington - USA Credit Rating At Risk Over Trump Tax Cuts

Moody's is the first of the major ratings agencies to venture some commentary on the impact of Trump tax reform on the US credit rating.

In an ironic twist, on the same day as Chinese officials, reviewing the nation’s foreign-exchange holdings have recommended slowing or halting purchases of U.S. Treasuries, Moody's warns that US tax cuts are seen as a credit negative for the USA Sovereign rating.

As Bloomberg reported: U.S. TAX CUTS SEEN AS CREDIT NEGATIVE FOR SOVEREIGN BY MOODY'S

 

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In a presentation on the implications of the new tax law, Moody's commented:

"Any boost to economic growth from the new US tax law will be modest and depend on how businesses and individuals deploy tax savings; growth unlikely to offset negative impact on government deficits."

Additionally, the contribution of tax cuts to aggregate growth will be modest, around one-tenth of a percentage point of GDP.

Maybe China is on to something as USA Sovereign CDS is trading at around 1.7x that of Germany CDS - a level near 9 year highs...

 

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Full Moody's Presentation below:

Comments

MoreFreedom Antifaschistische Wed, 01/10/2018 - 18:15 Permalink

" maybe trump will advocate just pulling the plug on debt holders.   Wouldn't that be entertaining. "

Unlikely, since the most debt holders are Americans, including just about everyone who has pensions and 401ks invested in treasuries, including the unsecured debt holders of Social Security and Medicare benefits.

But I agree Moody's is somewhat of a joke, especially their ratings of MBS back in 2008.  But then, they're part of a government created cartel of ratings agencies.

 

In reply to by Antifaschistische

uhland62 Antifaschistische Wed, 01/10/2018 - 20:49 Permalink

Most would have prepared for that and do as we speak. It was inevitable that a shake-up in this area would occur - today is as good a day as any. When Ireland has become a significant debt holder (instead of the biggies) something sus is going on.

Rating agencies are inconsequential now. After their 2007/08 frauds people are polite, like you'd be polite to your unavoidable, unloved, and not influential cousin. 

In reply to by Antifaschistische

buttmusk Antifaschistische Wed, 01/10/2018 - 21:15 Permalink

Lol printing to infinity does not solve any problems. Dollar will become worthless. Everyone will dump their treasuries, cost of US govt to issue new debt will be astronomical, China would probably then start a war with the U.S for what they will deem an act of financial terrorism. Sure they can print away their debt but the country would then permanently face much higher borrowing costs in the future in event of a default if the country survived a war. It would result in self-imposed fiscal austerity (much higher tax rates or very limited government spending) due to borrowing constraints once debt was inflated away. Corporations that are not location dependent will flee the U.S due to those much higher tax rates. The result: essentially zero economic growth in the aftermath due to no options for cheap credit fueled growth and the U.S. will no longer be able to remain a first world country.

In reply to by Antifaschistische

my new username DavidFL Wed, 01/10/2018 - 17:51 Permalink

Dubya and Obama had no business partners, as they were in the business of being in power. They both doubled our debt, for zero return. Trump needs to build the damned wall, throw out the illegals and jail Hillary.

A trade ban on China would hurt American consumers, but devastate China. Cheaper than war..

In reply to by DavidFL

uhland62 MozartIII Wed, 01/10/2018 - 20:52 Permalink

China will not cut off the money tap, although one day they will when it becomes clear that they are throwing good money after bad. They will just inject that much money into the US that secures some of their sales, but if they go over a certain threshold they will feed the war machine that threatens them. They are in for a tight rope act. 

In reply to by MozartIII

Yen Cross Wed, 01/10/2018 - 17:36 Permalink

    I'm fairly certain all the "yield seeking" dirtbags would be happy to own treasuries as yields move higher and the equity markets reach even moar insane multiples.

  As the $usd strengthens the Yuan donkey follows---

Rothbardian in… Wed, 01/10/2018 - 17:37 Permalink

Wait....so 60 years of entitlement spending and wars is not a threat to the credit rating of the country.  Letting me keep a fraction more of what I earn is the calamity that Moody’s is worried about?

 

Fuck off seems too kind of a response here.

yogibear aliens is here Wed, 01/10/2018 - 18:09 Permalink

Yeah, all 3 credit agencies.

Remember S&P threatened the US credit rating and Eric Holder went  after S&P with his dept of Just-Us thugs?

Eric Holder force S&P to change it's leader after it investigated it's mortgage CDO ratings.

Fitch and Moody's rated junk CDOs as AAA but never was touched. S&P threatened the credit rating so Holder was sent to stop the S&P credit rating threat. 

In reply to by aliens is here

wisehiney Wed, 01/10/2018 - 17:40 Permalink

ZHer's could help.

We could all pitch in and get Uncle Sam to sell us one of those nice ski mountains for cheap.

Tell him we will race him to the bottom.

 

DavidFL Wed, 01/10/2018 - 17:41 Permalink

Those Moody's guys are just financial geniuses - there is no other way to put it!! Who would have ever thought that cutting revenue to an already insolvent entity would be a net negative - whoda thunk it??

 

greven40 Wed, 01/10/2018 - 17:46 Permalink

Moody's---->propaganda.  If there was anything real in their assessments, the US would not even be on the radar, as they are the biggest debtor nation in history.  Moody's is just another department of the empire that does its part in pushing the agenda and narrative.

This isn't excusing Trump in any way, as he is a puppet of the zionist empire as well.  This is as real as the "establishment is against him" nonsense.

Yen Cross Wed, 01/10/2018 - 17:48 Permalink

   Traders don't care about "risk". The $usd could be a giant scab on a hookers ass, and tarders[sp] would still buy them for yield.  Tyler your superscript is fucked up!

wisehiney Wed, 01/10/2018 - 17:48 Permalink

Without huge fiscal and monetary support.

Any existing inflation turns into instant massive deflation.

Inflation hurts the leftist fed members constituents worst of all.

They will therefore easily bang down any whiff of inflation at any time.

Just withdraw a little support.

The same goes for higher rates.

You know who has the huge credit card, student loan, auto loans.

Higher rates are quickly self defeating.