This is not too good.
Even our bonds will soon be dumped!
The gold-plated credit rating of the United States â an article of faith across America and, indeed, around the world â may be at risk in coming years as the nation copes with its growing debts.
Multimedia
Payback Time: Corporate Debt Coming Due May Squeeze Credit
Times Topic: Moody's Corporation
That sobering assessment, issued Monday by Moodyâs Investors Service, provided a reminder that even Aaa-rated United States Treasury bonds, supposedly the safest of safe investments, could be downgraded one day if Washington failed to manage the federal debt.
Moodyâs said the United States and other major Western nations, particularly Britain, have moved âsubstantiallyâ closer to losing their gilt-edged ratings. The ratings are âstable,â but âtheir âdistance-to-downgradeâ has in all cases substantially diminished,â the credit ratings agency said.
A downgrade would affect more than American pride. The bigger risk would be to the countryâs ability to keep borrowing money on extremely favorable terms, and therefore to keep spending more money than it takes in from tax revenue.
A credit rating lets lenders and investors know how likely it is that a borrower can pay back a loan. A sterling rating means there is little for lenders to worry about. A lower one typically results in bond investors demanding higher interest rates on debt.
Those higher rates, in turn, add to the countryâs overall debt burden and can force the government to reduce spending, increase taxes or both. That difficulty has been well-illustrated recently in Greece and Portugal, with strikes and protests as citizens march in the streets to oppose tough austerity measures that directly reduce entitlements and state benefits.
Even our bonds will soon be dumped!
The gold-plated credit rating of the United States â an article of faith across America and, indeed, around the world â may be at risk in coming years as the nation copes with its growing debts.
Multimedia
Payback Time: Corporate Debt Coming Due May Squeeze Credit
Times Topic: Moody's Corporation
That sobering assessment, issued Monday by Moodyâs Investors Service, provided a reminder that even Aaa-rated United States Treasury bonds, supposedly the safest of safe investments, could be downgraded one day if Washington failed to manage the federal debt.
Moodyâs said the United States and other major Western nations, particularly Britain, have moved âsubstantiallyâ closer to losing their gilt-edged ratings. The ratings are âstable,â but âtheir âdistance-to-downgradeâ has in all cases substantially diminished,â the credit ratings agency said.
A downgrade would affect more than American pride. The bigger risk would be to the countryâs ability to keep borrowing money on extremely favorable terms, and therefore to keep spending more money than it takes in from tax revenue.
A credit rating lets lenders and investors know how likely it is that a borrower can pay back a loan. A sterling rating means there is little for lenders to worry about. A lower one typically results in bond investors demanding higher interest rates on debt.
Those higher rates, in turn, add to the countryâs overall debt burden and can force the government to reduce spending, increase taxes or both. That difficulty has been well-illustrated recently in Greece and Portugal, with strikes and protests as citizens march in the streets to oppose tough austerity measures that directly reduce entitlements and state benefits.
