Moody’s Investors Service said it may place the United States government’s debt rating on review for a downgrade if there is no progress made to increase the debt ceiling in the coming weeks. Moody’s stated “If the debt limit is raised and default avoided, the Aaa rating will be maintained.”
They went on to say further, “However, the rating outlook will depend on the outcome of negotiations on deficit eduction.” Moody’s, which currently has am stable outlook on the Aaa rating, said a lack of an agreement on deficit reduction will likely result in a negative outlook for the rating.
A sovereign debt crisis is encompassing most of Europe and in the midst of all this the United States is now under scrutiny by a very reputable rating agency. It is important for us to note that it is unlikely that Moody’s will be forced to actually downgrade US debt.
While the US government is debating now, politicians always seem to have a way of compromising on key convictions when they view a crisis is at hand.
However, what is critical to understand is how fragile the US economic situation is. It is hard for most Americans to believe that the government of the largest economy in the world would be even considered for a downgrade on their debt.
While it is very unlikely that any tangible impact will result from this statement by Moody, it shows how quickly the United States can be brought to its knees and how much debt we have already accumulated. In the long run, the United States will face significant problems stemming from their immense public debt.
In the long-run currencies around the world will become worth percentages of what they are now and gold and silver will be the recipients of such a decline. The fact that the United States is being considered is very disturbing and points to the weakness of the US government.
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