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?
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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
>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 simplest answer is the US has paid every piece of paper it has issued. Has never defaulted.
>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
Many people, perhaps yourself, are under a confused notion that for a country like the US that debt is somehow a problem. It’s not. It’s actually pretty good and generally stupid to not have some debt unless we reached some point where there was nothing to spend money on. Completely different game and completely different rules compared to individuals and credit lol.
The simplest answer is the US has paid every piece of paper it has issued. Has never defaulted.
The simplest answer is the US has paid every piece of paper it has issued. Has never defaulted.
Zero risk of default. As the worlds reserve currency the US can turn to the printer in the worst case scenario.
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