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Uncle Sam May Soon Lose His Financial Reputation

By Sally Maison
Published: Sunday, December 13th, 2009

If any giant lender plans to loan billions of dollars, it would most likely choose the United States government as its borrower. Over the years, this country has enjoyed a pristine credit rating that is coveted by nations all over the world. However, Uncle Sam may soon lose the reputation that made him who he is—his money in the bank.

Uncle Sam May Soon Lose His Financial ReputationFor as long as any citizen could remember, the United States has always enjoyed a prime triple-A credit rating. That is the highest that any consumer could get, which is like a FICO credit score of 800. People who have huge credit scores can borrow from banks with very low interest, get platinum card deals, and drive their dream car without worrying about high monthly interest rates. Same goes for Uncle Sam.

His high credit rating allows the Fed to borrow as much money it likes at the lowest interest rates possible. Because of his triple-A credit score, Uncle Sam gets the highest number of investments, the most security, and the most foreign interest.

Creditors feel confident lending to companies and countries that project high credit ratings because their scores indicate that they are strongly capable of paying back what they owe. That is why lenders keep lending to Uncle Sam, until their confidence in him started crumbling down lately as one credit scoring agency warns them that the United States must get its financial house in order or it will lose its financial reputation.
Moody’s Corporation warned this Tuesday that if the Fed does not set things right, it might lose its AAA credit rating. What makes Moody’s doubt Uncle Sam’s reputation? His debts.

The rating company announced recently that the United States’ debt is nearly 84 percent of its gross domestic product (GDP) and it is projected to go as high as 98 percent by 2010.

Analysts note that the country has never owed so much. The only explanation they can find is that the United States has spent so much on stimulus funds, bailouts, takeovers, and rescues. When many companies and financial institutions were going down, Uncle Sam was there to save them. Economists say the country is expected to owe more because of its additional plan for stimulus packages and healthcare reform.

Finance analysts say if the United States loses its current credit score, it will have a tougher time meeting its debts because creditors will likely to ask more in interest rates from the country. If Uncle Sam does not find a way to get back, it will most likely suffer another economic catastrophe, analysts conclude.

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