What is just around the corner and has all of America’s credit holders nervous? A likely downgrading of the U.S. governments rating by Moody’s Investors Service.
So, what’s the big deal?
The big deal will hit U.S. when we begin paying off the $16 trillion debt load we’re carrying. It’s going to increase the amount of interest we have to pay on that enormous debt.
Since the president and his administration failed to present one budget to date, Congress has no idea what our nation’s fiscal future holds — except higher rates when both houses of Congress are asked by the administration to raise the debt ceiling. That’s when it’s going to get ugly.
Back in 2011, Moody’s downgraded the U.S. government’s rating for the first time in history. At present, the nation’s rating is Aaa. Moody’s told Market News International (MNI) that the U.S. ability to hold onto its current Aaa rate was a “negative outlook into 2014 as unlikely.”
If Moody takes another dim view of our government’s failed attempts to get control of spending, the rating could fall to Aa1.
“The rating outlook also assumes a relatively orderly process for the increase in the statutory debt limit, says Moody’s,” according to MNI. “The debt limit will likely be reached around the end of this year, and the government’s ability to meet interest and other expenses out of available resources would likely be exhausted within a few months after the limit is reached.”
This may sound like a scare tactic, but Moody’s doesn’t play games with U.S. or any other nation that is spending more than it takes in from its citizens.
If our leaders continue to lead from behind, this could push the U.S. over the fiscal cliff.