Photo: David Blackwell via Flickr
Tim Geithner is out this morning with a new letter urging the GOP to hike the debt ceiling.He says the US will likely breach the legal borrowing limit sometime between March and May.
Regardless of how this turns out, it’s obviously ludicrous for Moody’s to keep a AAA rating on a country where one of the parties in power is vowing to force a situation that could force a default.
Eliminating the US AAA rating might roil markets, but it wouldn’t be the end of the world — it’s certainly not the Moody’s imprimatur that allows the US to finance itself so easily, so it’s doubtful that taking it away would be that much of a problem.
But it would allow Moody’s (and the rest of the ratings agencies) to do their job, which is to alert people to risks in credit, and it’s obvious that the US is a credit risk right now.