Tuesday, December 8, 2009

Moody's: USofA leads the way out of AAA


Moody’s, meanwhile, indicates that a number of sovereign borrowers are moving out of AAA territory by the simple measure of interest payments as a percentage of GDP:

Under US government projections, debt service will exceed 10% of GDP by 2013, which means that by one measure the US will move out of AAA territory. But the UK, Germany and France will be headed in the same direction.

If I am correct that economic weakness continues unabated through the next couple of years, the situation will be considerable worse than the Moody’s graph suggests, and governments will have difficulty funding themselves at today’s extremely low interest rates.


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