James Pethokoukis

Politics and policy from inside Washington

Why U.S. debt shouldn’t be AAA rated: It’s actually worse than Spain’s

April 19, 2011

Credit rating agencies such as S&P really place a lot of emphasis on two financial metrics:  the ratio of net debt to GDP and the ratio of net interest payments to government revenues. When you look at those two factors, Goldman Sachs concludes “that the US is already at the outer edge of AAA territory. ” (Thank goodness for the supremacy of the dollar.) Look at the pretty chart from GS:

gschart2

Comments

If the USD Index continues to fall over time, how would this affect the position of the US icon on this graph ? It would seem to me that the ‘current political/financial’ pressures are for the icon to move up vertically and tend to move to the right as well. What is not clear to me is how the various currency evaluations might interact regarding this graph.

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