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[makattak]

UPDATE 3-Growing deficits may threaten US Aaa rating-Moody's
Tue Feb 2, 2010 4:50pm ESTRelated NewsUS budget not solution to government's debt-Moody's
Tue, Feb 2 2010(Recasts lead, adds background)

Bonds  |  Financials

NEW YORK, Feb 2 (Reuters) - The Obama administration's budget takes a small step toward sustainable debt levels but more is needed to preserve the country's Aaa rating, Moody's Investors Service said on Tuesday.

"The debt trajectory is clearly continuously upward if further measures are not implemented," Moody's senior credit officer Steven Hess said in a statement.

As interest rates rise and the size of the debt increases, "debt affordability will deteriorate in a major way," he said.

President Barack Obama on Monday projected the U.S. budget deficit would soar to a record in 2010 as he made tackling double-digit unemployment his immediate priority.

The budget for the fiscal year to Sept. 30, 2011, which must be approved by the U.S. Congress, forecasts a deficit of $1.56 trillion in 2010, equal to 10.6 percent of gross domestic product.

Obama is under pressure to convince rating agencies and investors he has a credible plan to control the deficit and debt over time. Voter discontent over the deficit and high unemployment could also translate to potentially big losses for Democrats in congressional elections in November.

Freezing part of discretionary spending for three years is a positive step for the U.S. debt rating, but "the deficits projected in the budget do not stabilize debt levels in relation to GDP, and the portion of government expenditures going to pay interest on the debt shows a steady rise," Hess said.

With unemployment still high, a big fiscal adjustment right now would be politically difficult and could slow the economic recovery, he said.

In addition, extra spending for job creation in the current fiscal year is adding to the long-term debt trajectory, Hess said.

Entitlement programs will also put pressure on the government's fiscal position toward the end of the decade and in following years, regardless of the new budget proposals, Moody's said.

"The administration itself, in the budget release, recognized that further measures were necessary by announcing its intention to establish a Fiscal Commission," Moody's said.

However, the commission's goal may be politically difficult because it will require further budget cuts or tax increases, the rating agency said. (Reporting by Dena Aubin; Editing by James Dalgleish, Dan Grebler and Diane Craft)

http://www.reuters.com/article/idUSN0210536120100202

I've known (and said) for some time that our current state is unsustainable. It seems Obama has made a difference, he's moved the point of collapse closer. I had thought we had until 2030. Now? If Moody's is getting jittery, I'm thinking we have at most 10 years. (At the current rate of spending).

Our leaders HAVE to get serious about spending. Fortunately, it seems people are waking up. I hope it's not too late, though.

[AZRedhawk44]

Oh, they're deathly serious about spending.

They love spending.

[DenaliPark]

http://www.reuters.com/article/idUSN0210536120100202

I've known (and said) for some time that our current state is unsustainable. It seems Obama has made a difference, he's moved the point of collapse closer. I had thought we had until 2030. Now? If Moody's is getting jittery, I'm thinking we have at most 10 years. (At the current rate of spending).

Our leaders HAVE to get serious about spending. Fortunately, it seems people are waking up. I hope it's not too late, though.

 We don't have 10-years, it became too late with the election of Obama, we are now thralls to the unassailable forces of inertia, and it's dragging us over the precipice...

[RevDisk]

The US bond ratings are downgraded, it is the beginning of "teh suck".   The US will be forced to offer higher interest rates to convince folks to buy said bonds.  Higher the interest, the more of the budget goes to paying off interest.  If it continues without being checked (which it probably and hopefully would), the cycle continues until it hits junk status.  Then sane people stop buying them near completely.

When it hits junk status, the government either defaults on the debt or goes for hyperinflation.

[Standing Wolf]

When it hits junk status, the government either defaults on the debt or goes for hyperinflation.

Well, unless both.

[Bigjake]

Here we come..

http://en.wikipedia.org/wiki/Weimar_Republic

[Scout26]

The good news is if you have debt, with hyperinflation you'll be able to pay it off quickly. 

[sumpnz]

The good news is if you have debt, with hyperinflation you'll be able to pay it off quickly. 

If you can keep your job, and if your salary keeps up with the inflation.  Neither of those are anything like certainties.

Best bet when hyper-inflation sets in is to be debt free with a stockpile of hyper-inflating commodities (that you personally don't consume) if you want to come out the other side in good financial shape.

[Monkeyleg]

Best bet when hyper-inflation sets in is to be debt free with a stockpile of hyper-inflating commodities...

How long do pork bellies last in the refrigerator?

[lee n. field]

How long do pork bellies last in the refrigerator?

A stock of cigarettes in the freezer, and whiskey in the basement.  Coffee in 5 lb. sealed cans.

[Boomhauer]

Now? If Moody's is getting jittery, I'm thinking we have at most 10 years. (At the current rate of spending).

I've had a strong feeling that we didn't have long for a while now...

And every day an article comes out to support this further...

We are so boned...