when is the world going to finally recognise the USA can not print cash forever and expect its currency to stay as the universal trading currency.
Moody’s Says U.K., U.S. AAA Ratings Relatively Weaker (Update1) Share Business ExchangeTwitterFacebook| Email | Print | A A A
By Rocky Swift
Dec. 8 (Bloomberg) -- Moody’s Investors Service said its top debt ratings on the U.S. and the U.K. could “test the AAA boundaries” because their public finances were worsening in the wake of the global financial crisis.
The U.K. and U.S. had “resilient” AAA ratings, as opposed to the “resistant” top ratings on Canada, Germany and France, Moody’s said in a report today. None of the top-rated countries were “vulnerable,” or had public finances that were “stretched beyond the point of ‘no return’ to the AAA category,” according to the report.
The British pound fell against all of its 16 most-traded counterparts, dropping as much as 0.4 percent to $1.6381 versus the dollar. Public finances in “resilient” AAA-rated countries are “deteriorating considerably and may therefore test the AAA boundaries,” Moody’s said.
All AAA-rated governments were affected by the global financial crisis, with differences in their impact and ability to respond, Moody’s analysts led by Pierre Cailleteau said in the report. “Resistant” countries, which also include New Zealand and Switzerland, started from a more robust position and won’t see debt exceed levels consistent with their AAA status, Moody’s said.
British Chancellor of the Exchequer Alistair Darling said yesterday that he would rather suffer criticism for removing support for the economy too late than too early. The remarks suggested he will put off measures to reduce Britain’s biggest budget deficit since World War II.
‘Determined Effort’
“I do think we need to make a determined effort to get our debt down,” Darling said. “I would rather be found guilty of removing the support slightly too late than slightly too early.”
The U.K. entered the crisis in a vulnerable position and is now facing an “inexorable deterioration of debt affordability,” Moody’s said. The government’s ability to borrow large amounts of money at favorable terms supports its ratings, according to the report.
The U.K.’s public debt will swell to 89.3 percent of the economy in 2010 from 75.3 percent this year, according to the Organization for Economic Cooperation and Development.
The U.S.’s debt burden will climb to 97.5 percent of gross domestic product next year from 87.4 percent, the OECD forecast in June. National debt in the U.S. climbed to $7.17 trillion in November.
The expansion of the U.S. economy won’t be enough for it to make “major progress” in reducing its budget deficit, the ratings company said.
To contact the reporter on this story: Rocky Swift at [email protected]. Last Updated: December 8, 2009 02:29 EST
