The Credit Rating Agency Moody’s Wants U.S. to Increase its Debt?
Posted by FactReal on July 20, 2011
|Stupidity At Moody’s: Get Rid of Debt Ceiling and We Won’t Downgrade Your Debt
|In the midst of staggering illogic surrounding our debt ceiling, ratings agency Moody’s just raised the bar.
On Monday, it announced that the United States could increase its creditworthiness by – wait for it – eliminating the debt ceiling altogether:
|The United States is one of the few countries where Congress sets a ceiling on government debt, which creates “periodic uncertainty” over the government’s ability to meet its obligations, Moody’s [MCO 36.45 0.13 (+0.36%) ] said in a report.
“We would reduce our assessment of event risk if the government changed its framework for managing government debt to lessen or eliminate that uncertainty,” Moody’s analyst Steven Hess wrote in the report.
|Consider the illogic on display.
An entity’s credit rating – whether we’re talking about an individual, a household, or a business – is measured by amongst other things the total amount of debt outstanding, the value of the assets owned, and the cash flow generated each year.
If debt outstanding rises without a commensurate increase in assets or cash flow, the creditworthiness drops.