bank run blog

For at least four years, perceptive analysts have been predicting that the economic meltdown that began with massive securities fraud on Wall Street would eventually precipitate a steady decline in US prestige internationally, along with a dramatic reduction in American living standards. Among the more extreme scenarios, early on, was the nation losing its triple A credit rating.

Now that has become a possibility that mainstream media outlets are willing to consider. Three recent news stories contemplate different circumstances that could lead to the US being downgraded. USA Today reports that the country’s aging population threatens its credit rating :

“The United States may lose its “AAA” top credit rating unless the government adopts ‘concerted’ policy and fiscal reforms to mitigate the ‘intense’ pressures on the budget from an aging population, ratings agency Standard & Poor’s said Tuesday.

Unless the government takes measures to cut its fiscal deficit, the country’s credit rating would fall to single-A after 2015 and as low as the ‘BBB’ category by 2020, S&P said in a press release.”

The Treasury assures us that the staggering record budget deficit recently announced by the Bush administration will not lead to an immediate downgrade, according to the Washington Times :

“Two days after the White House revealed that the budget deficit for fiscal 2009 will set a record approaching $500 billion, the Treasury Department announced its strategy to finance all that extra borrowing.

Anthony Ryan, Treasury’s acting undersecretary for domestic finance, announced Wednesday that the federal government will borrow $171 billion during the July-September quarter. That’s the second-largest quarterly financing requirement in history - and fiscal 2009 doesn’t even begin until Oct. 1.

Mr. Ryan expressed confidence that the federal government would continue to maintain its AAA credit rating even as budget deficits rise.”

MarketWatch reports that even after the inevitable bailout of Fannie Mae and Freddie Mac, the US will still be a triple A debt customer :

“Although extending aid to Fannie Mae and Freddie Mac could test the resiliency of the U.S. government balance sheet, it would not endanger the U.S. government’s strong Aaa rating, Moody’s Investors Service said Thursday.”

USA Today : Aging population threatens USA’s “AAA” credit rating

Washington Times : Treasury confident it will keep AAA rating

MarketWatch : Moody’s: Fannie, Freddie woes no threat to U.S. ‘Aaa’ rating