Moody's Warns On USAAA Rating; IMF Piles On

It appears the cozy relationships between the credit ratings agencies and the US Treasury are starting to thaw a bit...same with the status quo coordination between the Fed and the IMF, the central banks' central bank.  You know things are getting dicey when the powers-that-be interconnectedness is fraying at the edges.

http://www.zerohedge.com/news/2013-01-02/moodys-warns-usaaa-rating-imf-piles

China’s Dagong May Cut U.S. Credit Rating Again If It Adopts QE3 Program

Another step toward banana republic status is in the cards. 

http://www.bloomberg.com/news/2011-11-12/china-s-dagong-may-cut-u-s-credit-rating-again-if-it-adopts-qe3-program.html

Egan-Jones downgrades US credit rating

http://www.egan-jones.com/client/download/RAR/3352Z%20US_110716.pdf

Real GDP increased at an annualized rate of 4.0% in Q1 2011, following an increase of 3.5% rise in the prior quarter. Personal consumption expenditures, exports, and nonresidential fixed investment contributed positively to growth during the quarter. Meanwhile, imports rose sharply. In the March 2011 quarter, trade in goods and services resulted in a deficit of $562B, many because of the high price of petroleum. However, the major factor driving credit quality is the relatively high level of debt and the difficulty in significantly cutting spending. We are taking a negative action not based on the delay in raising the debt ceiling but rather our concern about the high level of debt to GDP in excess of 100% compared to Canada's 35%. Nonetheless, since the US's debt is denominated in dollars, a hard default is unlikely.

Nota Bene

History has proven that defaults on domestic public debt do occur. In fact, seventy out of three hundred twenty defaults since 1800 have been on domestic public debt (1). Egan-Jones does not view a country's ability to print its own currency as a guarantee against default. Additionally, Egan-Jones generally views cases of excessive currency devaluation as a de facto  default.