I’m a United States citizen. Moody gives the US a AA+ credit rating (it was downgraded from AAA in 2011).
How can this be, despite the substantial amount of debt the US holds that only continues to grow?
Is it GDP, defense capabilities, the dollar being the de facto currency almost worldwide? A combination of these? Or is there another huge factor(s) I am missing?
In: 54
We are a stable, advanced economy. We pay our debt, 100% of the time. Nobody is afraid that buying U.S. debt is too risky.
[removed]
Because the USA has been really really good at paying back that debt.
As long as that continues, institutions will always trust that the government will continue to pay its debts and therefore give it a good rating.
>How can this be, despite the substantial amount of debt the US holds that only continues to grow?
Credit rating is based on their odds of repaying. The U.S. has never missed a payment, and is very reasonably able to repay it (yes, this is related to things like GDP. Basically, GDP roughly correlates to tax income, or potential tax income (in principle the U.S. could raise taxes). So the U.S. government has a clear revenue stream). While the debt is high in nominal terms, it’s not so high that the U.S. will ever struggle to pay it back from tax revenue. And it’s unlikely that tax revenue will ever dry up enough to put that at risk. Even if the economy has a downturn for a bit, it’ll weather it
The credit rating reflects the agencies opinion of how likely an issuer will default (not pay). The US is unlikely to not pay its bills. At least according to the ratios agencies.