Moody’s Puts U.S. on Credit Watch

“The U.S. rating is the anchor of the world’s financial system. If you have a downgrade, you have a problem.” – Steven Hess, Moody’s lead analyst for the U.S.

Credit rating agency Moody’s warned yesterday that the U.S. is at risk of losing its triple-A credit rating held since 1917. Moody’s said that unless the government reigns in rising healthcare and Social Security spending, the U.S. faces a ratings downgrade.

As today’s Financial Times rightly points out, “the credit crisis triggered by the growth in risky mortgage lending, which has affected banks and investors around the world, has dispelled the myth that a triple-A credit rating is a guarantee of security.” And let’s not forget securities that pension funds and governments invested in, relying on Moody’s and S&P ratings instead of taking the time to read the funds prospectus.

Moody’s analysis fails to address the major factors causing the shaky health of the U.S.’s financial stability. Social Security’s problem stems from President Johnson “unlocking the box” to pay for the Vietnam War. Since then, Congress has never looked back in “borrowing” from the fund as we continue to make war.

The U.S. does not deserve a triple-A credit rating as the government and the Federal Reserve have demonstrated no ability whatsoever to show fiscal discipline. You cannot “grow” the economy by raising consumer costs every time interest rates are lowered. The only thing you will “grow” is inflation which will further saddle the consumer with more debt and possibly bankruptcy.

Financial Times:
“U.S.’s triple-A credit rating ‘under threat’”
“Triple-A is not what it used to be”

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