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US Closer to Losing AAA Rating

Written By Luke Burgess

Posted March 16, 2010

Moody’s Investors Service says the U.S. and the UK have moved "substantially" closer to losing their AAA credit rating due to unsustainable debt levels.

Under the ratings company’s baseline scenario, the United States will spend more to service its debt service as a percentage of revenue this year than any other top-rated country except the UK, and will be the biggest spender from 2011 to 2013.

The U.S. government will spend about 7% of its revenue servicing debt in 2010 and almost 11% in 2013, according to the baseline scenario of moderate economic recovery.

Under its adverse scenario, which assumes 0.5% lower growth each year, less fiscal adjustment, and a stronger interest-rate shock, the U.S. will be paying about 15% of revenue in interest payments — more than the 14% limit that would lead to a downgrade to AA, Moody’s said.

Luke Burgess
Editor, Wealth Daily