Moody’s Takes Another Swipe At US Sovereign Rating, Sort Of

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Before you think there is a reaffirmed “Aaa” rating from Moody’s Investor Services, this was spoken at a conference.  Reuters reported that the Moody’s team head over the Sovereign Risk Group said that the United States had a safe “Aaa” credit rating.

Speaking at a media briefing in Tokyo, he said that the rating could ultimately be at risk if Washington proves to be be unable to reduce public debt.  Another risk is if the U.S. found itself suddenly unable to borrow significant amounts at low rates.  Also noted was if the U.S. dollar was severely challenged as the main currency reserve for many nations in the world.  The last scenario was given a relatively low risk.

Again, this was not any official action nor any solid change in stance from prior weeks of coverage.

Before you run out thinking that the U.S. ratings are crumbling and that the dollar is going to turn into the new peso, remember what it would take for a blow-up of the magnitude of the U.S. losing a Triple-A.  If this were to happen, what do you think the real relative ratings would be at other major countries in the world?

We would note that there is probably no true Triple-A ratings or at least very few of the prized Triple-A ratings anywhere in any category if you fully leverage the books and make all debts due upon demand.

Jon C. Ogg
June 23, 2009