Moody's Threatens to Slash U.S. Credit Rating

President Barack Owebama

NYC, June 2, 2011. Moody's Investor Services, one of the two major global credit rating corporation, is saying that if there's no imminent progress on the debt ceiling fight, the US credit rating will be cut.

The company ranks the credit-worthiness of borrowers using a standardized ratings scale. The US current has a credit rating of AAA, the highest possible rating. If they lower the credit rating for the United States, and this is starting to look very likely, then there could be profound implications.

This news comes after Standard and Poor's, the other major credit rating firm, had cut its long-term outlook on US debt to negative on April 18th.

Any rating downgrade, would leave Germany and France with a higher rating, and would erode the status of the United States as the world's most powerful economy and the US Dollar's role as the dominant global currency.

Since President Barack Hussein Obama, D-Kenya, was elected, the U.S. has gone on a borrowing and spending spree that was unprecedented in our history. During his first two years in office, President Obama added more to our national debt than President Bush did in his eight years in office.

President Obama told us all this big spending was necessary, in order to stimulate the economy and create new jobs. And he is requesting even more spending for next year's budget. This will mean even bigger budget deficits.

Sadly, all this free spending has gotten us very little. There still are 13 million unemployed, and the Great Recession shows no signs of abating. The housing market is still depressed, losing another 5% of home value this year. Consumer confidence is way down, and almost two thirds of the likely voters polled say "the nation is going in the wrong direction." President Obama's solution? Spend even more.

Interest on National Debt

If our credit rating is downgraded, we will be paying higher interest rates for each dollar we borrow. This year we will be paying close to half a trillion dollars in just interest alone on our national debt. A credit downgrade could send that number soaring much higher.

Even if a downgrade is somehow postponed, it's still enough to scare investors from holding or buying dollars. This could result in a massive dumping of dollar assets, as investors switch to higher rated investments for more safety.