Canadian Province Credit Rating Slips

B.C. credit rating slips

VICTORIA -- A skidding provincial economy has prompted a warning salvo from the company that sets credit ratings on British Columbia's debt.
Moody's Investors Service has revised its outlook on B.C.'s AAA rating from stable to negative, a move that Moody's says affects the province's approximately $39.8-billion in debt securities.
The change follows the release of the province's second quarterly financial report last month by Finance Minister Mike de Jong, who reported the province's annual deficit was projected to reach $1.47 billion, up from an earlier forecast of $1.1 billion.
De Jong blamed the problem on falling property taxes and lower prices for coal and natural gas, but insisted the government will still balance the budget next February.
Moody's assistant vice-president Jennifer Wong, lead analyst for the province, was keeping close tabs on that pledge.
"The negative outlook reflects Moody's assessment of the risks to the province's ability to reverse the recent accumulation in debt with the softened economic outlook, weaker commodity prices and continued expense pressures," said Wong. 

My view:

Many Canadian provinces face the same reality of most American states.  They are spending more than tax receipts provide, and four years into the post Lehman recovery, deficits are growing once again.

It appears that the 2008 crisis has not made a significant enough impact on both politicians and Keynesian economists to recognize that a debt based financial system with a fiat currency is destined for recurrent financial crises.  

While the British Colombian situation is far from critical at this point, the trajectory is clear - provincial borrowing costs will rise as the debt grows, and as the bond market gradually demands greater yields.

The question is only - how long before we have a provincial borrowing crisis when access to credit starts to dry up?