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
Credit ratings are not really about how much debt you have, but how good and reliable you are at servicing the debts you have.
In other words, do you make all the payments you need to make in time.
Creditors want to know that if they lend you money, you’ll make the interest payments. They don’t really want the whole debt paid off, there’s little profit in that. What they want is you paying interest every month for as long as possible.
Credit ratings are not really about how much debt you have, but how good and reliable you are at servicing the debts you have.
In other words, do you make all the payments you need to make in time.
Creditors want to know that if they lend you money, you’ll make the interest payments. They don’t really want the whole debt paid off, there’s little profit in that. What they want is you paying interest every month for as long as possible.
Credit ratings are not really about how much debt you have, but how good and reliable you are at servicing the debts you have.
In other words, do you make all the payments you need to make in time.
Creditors want to know that if they lend you money, you’ll make the interest payments. They don’t really want the whole debt paid off, there’s little profit in that. What they want is you paying interest every month for as long as possible.
USA never missed payment so the risk of bankruptcy is basically 0, the thing that this rating measures, but it prints money to do so driving inflation and the risk is carried to inflation instead to anyone who is investing and looking at moody’s
Thinking of it as debt is a bit of a fallacy. We issue our own currency. The government puts that money into the economy in several ways with bond ‘debt’ being one of them, spending ‘debt’ as another (that is spending above revenue). But that ‘debt’ is simply money that the government put into the economy and didn’t tax back. It’s not the kind of debt we experience at the kitchen table or corporate accounting office level and the rating services understand that.
USA never missed payment so the risk of bankruptcy is basically 0, the thing that this rating measures, but it prints money to do so driving inflation and the risk is carried to inflation instead to anyone who is investing and looking at moody’s
USA never missed payment so the risk of bankruptcy is basically 0, the thing that this rating measures, but it prints money to do so driving inflation and the risk is carried to inflation instead to anyone who is investing and looking at moody’s
Thinking of it as debt is a bit of a fallacy. We issue our own currency. The government puts that money into the economy in several ways with bond ‘debt’ being one of them, spending ‘debt’ as another (that is spending above revenue). But that ‘debt’ is simply money that the government put into the economy and didn’t tax back. It’s not the kind of debt we experience at the kitchen table or corporate accounting office level and the rating services understand that.
Thinking of it as debt is a bit of a fallacy. We issue our own currency. The government puts that money into the economy in several ways with bond ‘debt’ being one of them, spending ‘debt’ as another (that is spending above revenue). But that ‘debt’ is simply money that the government put into the economy and didn’t tax back. It’s not the kind of debt we experience at the kitchen table or corporate accounting office level and the rating services understand that.
I thought we were not paying on the debt itself but the interest on the debt and that we may default in the future because of the skyrocketing interest payments and that China holds over 1 trillion of our debt
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