Treasury Secretary Timothy F. Geithner said the U.S. is in no danger of losing its Aaa debt rating even though the Obama administration has predicted a $1.6 trillion budget deficit in 2010.
“Absolutely not,” Geithner said, when asked in an ABC News interview broadcast yesterday whether a downgrade is a concern. “That will never happen to this country.”
With the International Monetary Fund (IMF) calculating debt in the Group of 20 economies will reach 118 per cent of GDP in 2014, up from about 80 per cent before the crisis, some G7 nations are attracting the ire of investors and credit rating companies.
-Reuters
Ire is a nice word. The ire is with the fact hat these statements have limited creditability. The Us has a higher deficit to GDP than many lower rated countries. The debt to GDP is also higher than many countries rated Aa2 from Moody's.
For example, the US has a deficit to GDP of 13% and a debt to GDP of 94% India has a deficit to GDP of 9% and debt/GDP of 82%. It is rated Ba2. Now if the Us gets downgraded the same action should be taken for many other countries.
Countries with deficits to GDP in excess of 10% for 2009 include: US, Japan, UK, Spain, Greece, Ireland, Iceland and India. This represents 43% of global GDP. The US, EU, Japan and UK will need to issue $5 trillion of debt in 2010.
AAA countries should not make pronouncements about their ratings at this time.
No comments:
Post a Comment