U.S., Britain may test Aaa rating boundaries, Moody's warns

Marketwatch ^ | 12/8/2009 | William L. Watts

[SeekAndFind]

LONDON (MarketWatch) -- Credit-rating agency Moody's Investor Services on Tuesday warned that the United States and Great Britain may test the limits of their Aaa sovereign ratings due to deteriorating public finances.

"These are the Aaa countries whose public finances are deteriorating considerably and may therefore test the Aaa boundaries, but which display, in our opinion, an adequate reaction capacity to rise to the challenge and rebound," wrote Pierre Cailleteau, managing director of Moody's sovereign risk group, in the report.

Cailleteau divided the Aaa countries into three categories -- resistant, resilient and vulnerable.

The United States and Great Britain both fall in the "resilient" category, the report said.

"These countries are rated Aaa more because of their balance sheet flexibility than because of their current or projected debt levels over the next few years," Cailleteau wrote.

"Resistant" countries, such as Canada, Germany and France, were weakened by the crisis but started from strong fiscal positions. They don't face a lasting challenge to their economic model or a "massive risk of crystallization of contingent liabilities," the report said.

"While resistant, they are clearly not immune," Cailleteau said. "Debt may increase, but not to the extent of stretching affordability beyond a level consistent with a Aaa status."

Vulnerable countries' finances face big challenges "and seem stretched beyond the point of 'no return' to the Aaa category," the report said. The typical "vulnerable" was Ireland before its downgrade in July 2009, the report said, while noting that no Aaa government is currently included in the category.

[SeekAndFind]

SOME FACTOIDS :

* Britain's deficit is expected to top 12% of gross domestic product this year.

* The U.S. budget gap is forecast to touch 10%.

* Britain's gross debt to GDP ratio is forecast to rise to 69% at the end of 2009 from 47% in 2007.

* The ratio of U.S. debt to GDP rose to 53.5% from 40.2% a year earlier

* US ratio of interest payments to government revenue declined to 8.4% from 10% despite a sharp rise in debt outstanding.

STILL, This is what Moody's finally has to say :

""U.S. debt "financeability" is strong,"

"U.S. debt financeability is the strongest of any country."

[edcoil]

When your tribe takes all your money and gives to others - you soon run out of money.

[Uncle Miltie]

Everything is fine.

Until the moment everything is not fine.