US Government's AAA Rating at Risk?
Saturday, January 12, 2008
I happened across a story on Reddit today that for whatever reason has gotten surprisingly little media attention. According to this Reuters article:
Moody's Investors Service said on Thursday the United States' "triple-A" government bond rating could come under pressure in the very long-term if the Medicare and Social Security programs are not reformed. "These two programs are the largest threats to the long-term financial health of the United States and to the government's Aaa rating," Moody's analyst Steven Hess said in the agency's annual report on the United States. The report is not a rating action. Hess also said that risks from the U.S. subprime mortgage crisis are not affecting the nation's credit rating. However, the housing downturn and subprime crisis could result in "a period of slower growth in coming quarters, although further interest rate cuts by the Federal Reserve could help to maintain positive growth," he said.
Maybe its just me... but it seems like this should be a huge red flag. If the current credit crunch isn't enough to take down the US Governments credit rating but the inevitable Medicare and Social Security is, then maybe we should try to take care of that before it kicks us in the knees? Who knows? Maybe ten or twenty years from now "flight to quality" will refer to buying Toyota (NYSE: TM) or Berkshire Hathaway (NYSE: BRK.A) bonds, rather than than US treasury paper... I don't know of anyone warning that those companies are at risk of losing their AAA rating.
Posted by Rob Pitingolo 12:08 AM
