US Debt Rating Should Be 'C'

[Paslode]

US Debt Rating Should Be 'C': Independent Agency
GOVERNMENT, US SOVEREIGN DEBT, STANDARD AND POORS, FITCH, MOODY'S, WEISS RATINGS, RATINGS AGENCY, CHINA, THAILAND
CNBC.com
| 03 May 2011 | 03:09 AM ET

There have been increasing concerns about the fate of United States' prized triple-A sovereign debt rating. While Standard and Poor's recently downgraded its U.S. debt outlook to negative from stable, implying that a ratings cut could happen in two years, one independent ratings agency has given the U.S. sovereign rating a "C".

"A 'C' is equivalent to approximately a triple-B on the S&P, Moody's and Fitch scales. It's two notches above junk and one notch above the equivalent of a single A," Martin Weiss, President of Weiss Ratings, told CNBC Tuesday.

Weiss was quick to add that while the rating seems weak, the debt situation is not in a danger zone that would trigger panic, noting that there was still broad market acceptance for Treasurys.

The grade reflects the U.S. massive debt burden, low international reserves and the volatility in the American economy, he said.

The U.S. government debt is fast approaching the $14.3 trillion ceiling, with the debt-to-GDP ratio close to 100 percent. And a downgrade of U.S. Treasurys - one of the most widely held assets - could theoretically raise borrowing costs and in a worst case scenario, trigger a default on the government's debt obligations.

America's rating was ranked 33rd out of 47 nations, according to Weiss, which began tracking sovereign debt last year. France and Japan also got a "C" rating, while Only China and Thailand received an "A" rating.

Weiss Ratings based its score purely on statistics, and does not take into account qualitative factors such as political stability.

© 2011 CNBC.com

http://www.cnbc.com/id/42871647

[rdret1]

It is going to be a tough few years coming up.

[Richard]

GIGO.

Richard

[nmap]

So...what are those ratings really worth, anyway? Recall that on the CMOs, the agencies simply went with what the underwriter asked and did no independent analysis.

Will the U.S. pay its debts? Sure. No worries on that one. Those bonds will be paid in full and on time, right to the penny.

However - no one ever said what that penny (or, for that matter, all those trillions of dollars) would be worth.

I figure about half what they are now. Pity the poor retiree living (existing?) on a fixed income.

[Burns76]

I'm thinking these ratings have to be curved for the current environment / situation and probability of future success.

Sort of like when the best test score is a 73% and yet that student gets the A+, everyone else falls below based on the distribution of scores.

Or based on some sort of method relying on the variation from the mean +/- x standard deviation etc. (X would have to be category based etc.)

Because on a straight up analysis I think it would show that most (if not all, when considering the amount of $$$ the fed provided to foreign banks) are failing.

Bloomberg story:

http://www.bloomberg.com/news/2011-0...rs-secret.html