Another Credit Downgrade for USA?

The financial news continues to grow more disturbing for the USA.  Today the headline in the WSJ and other papers around the country is that Moody's (large credit rating company) has threatened to cut the USA debt rating AGAIN if Congress doesn't do something quick to close the looming gap between what we are spending verses what Congress is going to do with the Federal Government's Credit Limit...which currently we have maxed out.

Washington • Moody’s Investors Service is warning the U.S. government that it could lose its sterling debt rating if Congress and the Obama administration don’t reach an agreement soon to raise the nation’s borrowing limit.

A credit rating agency said Thursday that if the parties fail to make progress "in coming weeks," it would put the U.S. rating under review for a possible downgrade. That’s because there’s a "very small but rising risk" that the government will default on its debts.

The U.S. government hit its $14.3 trillion borrowing limit on May 16. The debt limit is the amount the government can borrow to help finance its operations.


Moody’s said it had expected strong political debate over the topic. But the entrenchment of both sides is greater than it anticipated.

Time is growing short. The Treasury Department has said the U.S. government is at risk of a default if it does not raise the borrowing limit by Aug. 2. That is when the Treasury department has said it will run out of accounting maneuvers to meet the nation’s financial obligations without breaching the debt limit, which would provoke a crisis, or even a default.

Here it is; http://www.sltrib.com/sltrib/money/51934121-79/debt-government-limit-moody.html.csp

Remember the first downgrade from Moody's was given a few months ago when the USA was downgraded from "stable" to "negative".

This is a pickle.  If you don't raise the limit and let the nation borrow more money (borrow from it's Visa to pay it's American Express) then defaults will start to happen...which will raise our interest rate on our American Express card...which will make it more expensive to keep borrowing...and bankrupt us even sooner than we hoped.

On the other hand, if you raise the debt limit and we already have $14.3 trillion on our American Express Card...and simply allow Congress to kick the can down the road...and end up continuing to punish every saver in America by making his dollars decline in value...then you are still on the road to bankruptcy and it may be a bigger explosion with more damage when it happens in 3 years verses forcing it to happen today.