Moody’s may drop U.S. credit rating...Oh? ...so where have we heard this before?

Source: Daily Mail

Moody’s may drop U.S. credit rating

“The United States, which posted a record deficit in the last fiscal year, may lose its AAA-rating if it does not reduce the gap to manageable levels in the next 3-4 years, Moody’s Investors Service said on Thursday,” Reuters reported.

Record deficits of $450 billion followed by $1.4 trillion will tend to make investors nervous.

“The AAA rating of the U.S. is not guaranteed,” said Steven Hess, Moody’s lead analyst for the United States said in an interview with Reuters Television. “So if they don’t get the deficit down in the next 3-4 years to a sustainable level, then the rating will be in jeopardy.”

The dollar is worth less. Unemployment will soon top 10%.

Hope you like the Change, 53% of America.

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Heard this before...

Back on February 21st, Ellen Brown wrote this: " Moody's credit rating agency is warning that the U.S. government's AAA credit rating is at risk, because it has taken on so much debt that there are few creditors left to underwrite it. "

"Diseases desperate grown are by desperate appliances relieved, or not at all." – Shakespeare, "Hamlet"

Moody's credit rating agency is warning that the U.S. government's AAA credit rating is at risk, because it has taken on so much debt that there are few creditors left to underwrite it. Foreigners have bought as much as two-thirds of U.S. debt in recent years, but they could be doing much less purchasing of U.S. Treasury securities in the future, not so much out of a desire to chastise America as simply because they won't have the funds to do it. Oil prices have fallen off a cliff and the U.S. purchase of foreign exports has dried up, slashing the surpluses that those countries previously recycled back into U.S. Treasuries. And domestic buyers of securities, to the extent that they can be found, will no doubt demand substantially higher returns than the rock-bottom interest rates at which Treasuries are available now.1
Who, then, is left to buy the government's debt and fund President Obama's $900 billion stimulus package? The taxpayers are obviously tapped out, so the money will have to be borrowed; but borrowed from whom? The pool of available lenders is shrinking fast. Morever, servicing the federal debt through private lenders imposes a crippling interest burden on the U.S. Treasury. The interest tab was $412 billion in fiscal year 2008, or about one-third of the federal government's total income from personal income taxes ($1,220 billion in 2008). The taxpayers not only cannot afford the $900 billion; they cannot afford to increase their interest payments. But what is the alternative?
How about turning to the lender of last resort, the Federal Reserve itself? The advantage for the government of borrowing from its own central bank is that this money is virtually free. This is because the Federal Reserve rebates any interest it receives to the Treasury after deducting its costs, and the federal debt is never actually paid off but is just rolled over from year to year. Interest-free loans that are never paid off are basically free money. In 2008, 85% of the interest collected by the Federal Reserve (or "Fed") was returned to the Treasury. The average interest rate on Treasury securities today is only about 3%; 15% of 3% is less than ½% – such a negligible interest as to make the money nearly free. Read full article: Monetize This! A better way to fund the stimulus package

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