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America becoming a bad credit risk…

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What happens in your life when you are deemed a bad credit risk? We all know the answer to that one. It’s hard to get bank loans or credit cards, and you find yourself punished financially just about every which way the powers-that-be can figure how to do it. In short, it’s a miserable situation.

Word now comes from Moody’s Investor Service that the United States is on the radar for being downgraded from its longstanding ‘gimme’ Triple A credit rating. This is a big deal from a company that swings a big stick when it comes to judging financial worthiness. The actual statement from Moody’s was this:

“If such a trajectory were to materialize, there would at some point be downward pressure on the triple A rating of the federal government.”

What trajectory are they referring to? Federal borrowing is so high that interest payments on the debt will soon reach 15% of the federal budget. Uh oh…we haven’t seen a number like that since the 1980s, and then it was driven by high interest rates, not insane debt. Moody’s isn’t willing to bet that the Fed will find the political will to raise taxes OR cut spending. An interest rate shock could unravel the whole house of cards.

Furthermore, Moody’s is not impressed with the Obama’s administrations fiscal acumen and, as such, refuses to guarantee the United States continued Triple A rating. Think countries around the world are going to be so eager to carry debt for an out of control spender?

Would you?

The Holistic Survival Team

Flickr / Violentz