Tuesday, March 16, 2010

WIth a straight face...

...the ratings agencies continue to betray their lack of understanding when it comes to fiat sovereign currency issuers, especially when said issuer is the reserve currency for the entire world. Again, if debt ratios were causal to rate increases, why has Japan been at or (very) near zero rates with debt/GDP approaching 200%??

NEW YORK (Fortune) -- The United States isn't in jeopardy of losing its gold-plated credit rating, though by one measure America is closer to the ratings-downgrade danger zone than Spain.

That's according to credit rating agency Moody's. In a quarterly report about sovereign debt, Moody's analysts wrote that despite market worries about rising government debt levels, there is "no imminent rating pressure" for the United States and other big governments carrying its highest triple-A rating.

But the report added that these governments' margin for error "has in all cases substantially diminished," thanks to a weak outlook for economic growth and enormous debt loads taken on to quell the financial meltdown of 2008-2009.

Cutting back on public spending too soon risks a double-dip recession, Moody's said, while leaving stimulus measures in place too long could lead to a sharp rise in interest rates "with more abrupt rating consequences a possibility."

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