Moody’s Waves Red Flag on America’s Growing Debt

Moody’s Investor Service is sounding the alarm about a growing Federal debt. The credit rating agency says the US sovereign credit which rated triple  A would be under threat unless the US economy grows at a robust pace or under go massive cuts to reduce spending.

Moody’s said the country faced a trajectory of debt growth that was “clearly continuously upward”.

Steven Hess, senior credit officer at Moody’s says when President Obama presented his budget last week; this did not stabilize the deficit to the gross domestic product.

“Unless further measures are taken to reduce the budget deficit further or the economy rebounds more vigorously than expected, the federal financial picture as presented in the projections for the next decade will at some point put pressure on the triple A government bond rating,” the rating agency added in an issuer note.

The White House announces the deficit is $ 1.6 trillion deficit. This is a 10.5% of GDP second highest since World War II.

The  debt to GDP ratio has steadily increased for the US are climbing from 53% in 2009 to 73% in 2015, to 77 % by 2020.

Moody’s, however, says this understates the overall US debt level.

“Using the general government measure, including state and local governments as well as the federal government, which is used internationally, this ratio would be well over 100 per cent in 2020.”

Financial Times has the rest of the story.


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