Moody's puts US on notice regarding debt ceiling

Actually, it's not that big of a deal but the press will spin it that it is and the Democrats will play it up too.


Moody's Investors Services said it had initiated the review because of "the rising possibility" that Congress will fail to raise the debt ceiling by Aug. 2 -- something that could lead to a U.S. default on its debt.

If the debt ceiling isn't raised by then, the Treasury Department says it will no longer be able to pay all the country's bills in full and on time without being allowed to borrow new money. (Read: Debt ceiling FAQ)

"Moody's considers the probability of a default on interest payments to be low but no longer to be de minimis," Moody's said in a statement.

The United States enjoys its AAA rating in part for having always stood behind its debt and paid its bills on time. As a result, U.S. Treasury bonds are considered the world's safe-haven investment.The Treasury Department issued an immediate response Wednesday.

"Moody's assessment is a timely reminder of the need for Congress to move quickly to avoid defaulting on the country's obligations and agree upon a substantial deficit reduction package," Treasury official Jeffrey A. Goldstein said in a statement.

All Moody's is saying is that they will "review" the situation if the debt ceiling isn't raised. This illustrates the biggest problem facing the GOP; perception. The perception here and overseas if the debt ceiling isn't raised will be very bad and probably affect the markets and perhaps even interest rates. No one is really sure, however - a fact that the president and Geithner are playing for all that it's worth - what happens on August 3rd in the real world of dollars and cents.

Almost certainly the president was being disingenuous when he tried to scare old folks by saying the social security checks won't be mailed. Here too, however, there is a small measure of uncertainty. Other payments might also be affected but Geithner, who has been holding secret meetings on this issue, isn't letting on what the Treasury Department is thinking.

If the debt ceiling isn't raised, it could end up one unholy mess. Or not. You pays your money and you takes you chances. The GOP is betting it won't.