What Would Happen if the Moody's US Credit Rating Goes Down?
Audio version available here:
Length approx. 1 min. 20 sec.
Moody’s Investors Service is a “leading global provider of credit ratings, research, and risk analysis”. On November 10th, Moody's changed the outlook of the US debt to negative. This change does not have any immediate consequences, however, even the idea of a downgrade could make it more expensive to borrow money and harder for the US to pay off debt.
One of the key factors in Moody’s decision was the lack of “effective fiscal policy measures” due to “political polarization”. Moody cites the recent ousting of the House Speaker and the lengthy replacement process as an example of political discord. According to Moody, this political polarization will continue and will make it difficult for Congress to agree to any fiscal policy. This is especially prudent as the latest threat of a government shutdown looms over the Thanksgiving holiday.
A downgrade to America’s creditworthiness has serious implications. Borrowing money would be more expensive as personal creditworthiness would take a hit, resulting in being charged at a higher interest rate. Interest rates would also be higher for the US government, making it more difficult for Washington to pay off debt.
Fortunately, Moody still needs to conduct a further review to decide whether a downgrade is warranted. However, as a business owner, it is important to understand this level of creditworthiness and how it could affect you. If you have any questions or concerns, and need the right guidance, call our experts at XQ CPA to find out what you can do to protect your business.
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