5.09.2010

US spiraling debt like a "shock collar, and its jolt may await like an invisible pet fence"

U.S. Debt Shock May Hit In 2018, Maybe As Soon As 2013: Moody's

Excerpt:

Moody's Investors Service has brought new transparency to its sovereign ratings analysis — so much so that 2018 lights up as the year the U.S. could be in line for a downgrade if Congressional Budget Office projections hold.

The key data point in Moody's view is the size of federal interest payments on the public debt as a percentage of tax revenue. For the U.S., debt service of 18%-20% of federal revenue is the outer limit of AAA-territory, Moody's managing director Pierre Cailleteau confirmed in an e-mail.

Under the Obama budget, interest would top 18% of revenue in 2018 and 20% in 2020, CBO projects.

But under more adverse scenarios than the CBO considered, including higher interest rates, Moody's projects that debt service could hit 22.4% of revenue by 2013.


Comment: At that point of time our debt securities will be downgraded and low interest rates for the Federal government will be no more! (Think Greece!)

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