US Credit Rating Downgrade News Flash

Reader Bill sent us this newsflash.

This is a translation from the original German:

Feri ranks the creditworthiness of the United States down
Harald Weygand
Wednesday, 06.08.2011, 08:56

Bad Homburg, 8 June 2011 - The Bad Homburg Feri EuroRating Services AG downgraded the first credit rating agency's credit rating for the United States from AAA to AA. Feri analysts justify the step with the continuing deterioration of the creditworthiness of the country due to high public debt, inadequate fiscal consolidation measures and weaker growth prospects.

"The U.S. government has combated the effects of the financial market crisis has so far primarily by an increase in government debt. We do not see that here is sufficient countermeasures, "said Dr. Tobias Schmidt, CEO of Feri EuroRating Services AG. "Our rating system shows a unique deterioration, so the downgrading of the credit ratings of the U.S. is a natural fit."

For the third consecutive year the deficit of the United States is in relation to gross domestic product (GDP) in the double-digit percentage range. "Deficits of such magnitude are sustainable fiscal policy is not compatible. On a better rating to think again when the U.S. government consolidated its long-term sustainable budget, "Schmidt is final.

Feri EuroRating Services is on the Federal Financial Supervisory Authority (BaFin) as an EU credit rating agency approved and created more than 20 years, sovereign ratings. Every month, the Feri analysts evaluate from the perspective of a foreign investor's ability and willingness of countries to repay their debts. The result is the evaluated country has a credit rating in eleven possible gradations between "AAA" (best credit) and "Default".

As readers may recall, a Chinese agency rated US credit worthiness in a similar manner not long ago. As this agency was not an establishment organization, its November 2010 warning was dismissed.

China ratings agency downgrades U.S. after Fed move

NEW YORK | Tue Nov 9, 2010 4:37pm EST

(Reuters) - A Chinese credit ratings agency downgraded the United States' sovereign credit rating on Tuesday, citing the Federal Reserve's controversial move last week to pump more dollars into the U.S. economy.

As Beijing and Washington locked horns on economic policy ahead of a Group of 20 leaders summit this week, the Dagong Global Credit Rating Co. Ltd cut the U.S. local and foreign currency long-term sovereign credit rating to A-plus from AA.

The ratings agency, which warned it might cut the U.S. ratings further, said its move reflected the United States' "deteriorating debt repayment capability and drastic decline of the government's intention of debt repayment."

Tensions over economic policies between the United States and China have been revived by the U.S. central bank's decision last week to pump an extra $600 billion into the country's struggling economy which has further weakened the U.S. dollar.

As some point, perhaps only months away, it will become more expensive for the US to borrow money from foreigners.

The question is how long?

And will the Fed & Treasury begin to show some QE & spending restraint?

We remind our readers of how this worked with Greek interest rates back in 2007 when their debt hit 100% of GDP.


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