America's Credit Rating Headed for a Fall?

AmericanMonetaryAssociation.orgThe thought would have been unfathomable to previous generations but, for us at the American Monetary Association, we wonder why it hasn’t happened yet? We’re talking about our nation’s credit rating which, so far, continues to hold firm at the highest possible ranking, even though mutterings from two large credit rating services about our economic future continue to surface in news reports now and then. Both Moody’s and Standard & Poor have made recent comments about the untenable condition of American debt.

Having witnessed a succession of terrible financial decisions over the past few years by the Obama Administration and the Federal Reserve alike, we wonder how long the seemingly unassailable “Aaa” rating could last.

From Moody’s, senior analyst, Sarah Carlson had this to say: “We have become increasingly clear about the fact that if there are not offsetting measures to reverse the deterioration in negative fundamentals in the U.S., the likelihood of a negative outlook over the next two years will increase.”

Carol Sirou of Standard & Poor France echoed the sentiment: “The view of markets is that the U.S. will continue to benefit from the exorbitant privilege linked to the U.S. dollar to fund its deficits, but that may change.”

The bottom line is that financial experts are beginning to get nervous about the parade of zeroes attached to the end of our annual budget and national debt. While we’re used to hearing quantities like billions and trillions bandied about, a few people are pointing out that those are pretty humongous numbers, and it doesn’t seem like anyone has a solid plan in place for making them smaller. Federal Reserve money printing to fund bond buying seems to be an open-ended proposition.

How long will it continue? Until it works has been the answer so far, as if that eventuality is a foregone conclusion. But, pray tell, Mr. Bernanke and Obama, what if it doesn’t? What then? What if your little shell game suddenly explodes into virulent hyperinflation, the kind that has ruined economies and brought down governments in the past.

We can certainly understand why credit rating services might be getting a little jittery.

The American Monetary Association Team

Flickr / Infrogmation

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