Finally, a logical warning on US credit.
Moody’s is out with a comment saying that if there’s no imminent progress on the debt ceiling fight, the US credit rating will be cut.
This makes total sense, and we applaud Moody’s for doing their job: Identifying an imminent (real) issue, and sensibly advising (ahead of time) about what could be a threat to US debt holders.
This should help put an end to this idea that a technical default would be just fine, and that somehow all this brinksmanship would be good for US credit somehow.
Back in January, we called on Moody’s to do exactly this: Threaten a ratings cut as a way of warning about the harmful effects of this fight.
They’ve done exactly that.