Moody’s Mulls US Debt Downgrade
A long article about the fiscal cliff in the US gave the various sorts of possible outcomes that could come from gridlock in Washington as the discussion heightens at the turn of the New Year. But, deep in the article, Moody’s offers its sober analysis of the US’s outlook regardless of what comes of the spending cuts and tax increases – you know, “shock therapy” – proposed for the US economy at the beginning of the year if the debt ceiling is not raised. One thing is for sure based on what Moody’s told Bloomberg: gold and silver can expect a rally that will carry gold to its old-highs and silver to trace those gains as Moody’s anticipates downgrading US debt just as S&P did during the debt ceiling debate of 2011.
Buried deep in an article today at Bloomberg:
“As our reports indicate, despite increased revenues from anticipated GDP growth, there isn’t a plausible scenario for the U.S. to grow its way out of the deficit,” John Piecuch, a spokesman for S&P, wrote Oct. 5 in an e-mail.
Moody’s said its Aaa rating for the U.S. will probably be cut one level next year unless the government agrees on a plan to reduce the ratio “over the medium term.” The firm considers debt levels in the whole economy in its sovereign ranking, said Steven Hess, the senior vice-president and lead analyst covering the U.S. at Moody’s in New York.
“As the household deleveraging goes on, because consumption is the biggest part of GDP, as long as that continues it’s harder for the federal government to reduce its deficit, to reduce its debt ratio,” Hess said Oct. 3 in a telephone interview.
