The United States Isn’t A Top-tier Creditor, In One Map

WorldCreditRisk

But how does the United States stack up internationally? For that we turn to the BlackRock Investment Institute, the research arm of the giant money manager. It has created the “BlackRock Sovereign Risk Index” which aims to combine key aspects of creditworthiness of 48 countries around the world. It factors in plenty of things that have to do with the substance of different countries’ finances, such as their current debt and deficit levels, banking system strength, and exposure to debt denominated in foreign currencies. But it also adds an important layer that it calls “Willingness to Pay.” It measures the effectiveness and efficiency of governments to meet their obligations, and counts for 30 percent of the total index. Perhaps it shouldn’t be surprising after the last couple of weeks of government shutdown and debt ceiling chicanery in Washington, but by BlackRock’s reckoning, the United States is not among the top-tier credit risks by this ranking. Here’s a complete map: You can check the detailed analysis for each country in an interactive graphic here . By BlackRock’s reckoning, the world’s most creditworthy nations–those with both solid finances and solid political systems that ensure bonds will be repaid–are the likes of Norway, Singapore, and Switzerland. The United States, as the map shows, is in the second tier, more similar to South Korea and Austria and Malaysia in its creditworthiness. For anyone who follows the news, it is hard to disagree. Neil Irwin is a Washington Post columnist and the economics editor of Wonkblog. Each weekday morning his Econ Agenda column reports and explains the latest trends in economics, finance, and the policies that shape both.

Fitch Places United States’ ‘AAA’ on Rating Watch Negative

Like the 747, the Space Shuttle and the iPhone that followed, the United States became a symbol of American innovation and resolve. She was the epitome of her namesake nation on the high seas. On her maiden voyage she shattered speed records across the Atlantic. Those records are still unbroken. When President Kennedy challenged us to go to the moon before the 1960s came to a close, Americans and their government rallied to the cause. That doesnt mean there wasnt doubt and dissention. Debate is part of our system. But we drove hard to achieve an historic goal for our nation and humanity that has not been duplicated. Its hard to imagine such lofty accomplishments emerging from todays Washington. Today, with the Space Shuttle fleet a series of museum exhibits, we wonder if our quest for bold innovation has permanently taken a back seat to special interest politics and partisan gridlock. The Obamacare and debt ceiling debates is a sideshow to the larger problem of government dysfunction that is impacting Americans faith and confidence in the system. Some blame Republicans, some the Democrats, still others the Tea Party or Liberal ideologues.

SS United States: When Washington Got Things Done

The SS United States seen from the upper windows of the South Philadelphia IKEA. (Credit: SS United States Conservancy)

– Fitch’s medium-term fiscal projections imply federal and general government (which includes states and local governments) gross debt stabilising next year and over the remainder of the decade at around 72% and 104% of GDP, respectively. This is below the 80% and 110% thresholds that Fitch previously identified as being inconsistent with the U.S. retaining its ‘AAA’ status. – Nevertheless, public debt stabilisation at such elevated levels still render the US economy and public finances vulnerable to adverse shocks and in the absence of additional spending reform and revenue measures, deficits and debt will begin to rise again at the end of the decade. The U.S. is the most heavily indebted ‘AAA’ rated sovereign, with a gross debt ratio equivalent to double that of the ‘AAA’ median. RATING SENSITIVITIES The RWN reflects the following risk factors that may individually or collectively result in a downgrade of the ratings: – Failure by the government to honour interest and/or principal payments on the due date of U.S. Treasury securities would lead Fitch to downgrade the U.S. sovereign IDR to ‘Restricted Default’ (RD) until the default event was cured. We would also downgrade the rating of the affected issue(s) to ‘B+’ from ‘AAA’, the highest rating for securities in default in expectation of full or near-full recovery. Debt securities approaching maturity or those with approaching coupon payments would be vulnerable to a downgrade. The Country Ceiling would likely remain ‘AAA’. In the event of a deal to raise the debt ceiling and to resolve the government shutdown, which Fitch expects, the outcome of a subsequent review of the ratings would take into account the manner and duration of the agreement and the perceived risk of a similar episode occurring in the future.