Written by Bryan Lutz, Editor at Dollarcollapse.com:
You might think that with the US debt clock widely available to everyone on the world-wide web, more people would pay attention to it.
But, no.
That is not the case.
Debt is pervasive – it’s everywhere.
The whole monetary system is built on debt.
Here’s how it works:
Whenever the Fed prints money, what they’re actually doing is issuing debt.
They add some numbers to their balance sheet, and voila – more money.
That money is then lent to the US Treasury, which is then lent to banks.
And then it is lent to businesses, for real estate, and the average joe who needs to go to work.
But what happens if all of a sudden, no one wants your debt? You have to print more than you want to. It’s a problem no one wants.
That’s what debt watchdog, ‘Moody’s Ratings’ is all about.
Not “credit ratings.”
They watch the price of debt…
And right now, there is an exceedingly high price for debt. More than there is room in a budget.
So the budget must expand beyond its limit.
That’s what Moody’s is worried about.
Bloomberg reports:
US Debt Top Rating in Doubt If Deficit Ignored, Moody’s Says
“The next US administration “must grapple with widening budget deficits,” warned Moody’s Ratings in a report published Tuesday, nearly a year after it announced a negative outlook for the country’s sovereign credit profile.
“The administration’s tax and spending policies will affect the size of future budget deficits and the expected decline in US fiscal strength, which could have a significant effect on the US sovereign credit profile,” analysts led by Claire Li and William Foster wrote in the report. “These debt dynamics would be increasingly unsustainable and inconsistent with a Aaa rating if no policy actions are taken to course correct.”
The US will soon be forced to face the truth – the only way to pay for their will be to issue more debt.
Then there’s the next concern…
The price of debt can also be measured by the price of US Treasury bond yields.
A bond yield acts like an interest payment. If the yield is too high, it costs the bond issuer too much money.
So, our debt watchdog has a kind of “tripwire” for that.
They say…
“…Moody’s has a baseline estimate of 4% for the 10-year yield and Foster said, “if rates remain at current levels or below that, that would be positive and create a bit more space for the cost of debt.”
If bond yield goes past 4% then the US will have to print too much debt to pay for those bonds as they mature.
Now, some may call Moody’s a credit ratings company.
For all those who understand what fiat money really is, Moody’s is our debt watchdog calling out the US sovereign debt crisis one report at a time.
