The “market” is being more truthful than Moody’s… Bloomberg points out that several recent bond sales to private entities (Warren Buffet paying for his raillroad, Procter and Gamble and Johnson & Johnson) have received interest rates at auction lower than what lenders are demanding from the US Treasury for similar maturities.
So what this is saying is that US T-Bonds are now considered more risky than lending money to the people who make Pringles. The problem is that when interest rates start to go up, the cost to fund the $14 trillion in debt will zoom up, taking out a big chunk of all the incoming tax revenue. That will force Moodys to admit the truth, and then it’s katey bar the door – once U.S. debt is not AAA, the rates will become unaffordable.
