The Credibility of Credit Agencies

Peter Chatwell is almost spot on here. He says that Moody's "report is a warning shot to governments, setting out the line that they can’t cross with their budgets." Actually, he's only off by a single letter.
This is Moody's putting on a show of the Burlesque variety, all tease and no tits, to convince someone, anyone, that they and their brethren credit agencies are even remotely relevant or accurate. Remember that these are the same companies that would, by their own admission, rate a "deal structured by cows." A long time ago I said that this crisis would cause the US to lose its AAA rating, but I've long since realized that the rating is meaningless - and that it will never change. The dubious relationship between a sell-side research analyst and his bank's top client appears downright honorable when compared to that of a rating agency and firms that write agencies checks to grade their bonds.
Look, you can't have Mark to Magic without the magicians, but now that the rabbit is out of the hat and into the frying pan the curtain must fall on this sideshow.

clipped from www.bloomberg.com. The U.S. and the U.K. have moved “substantially” closer to losing their AAA credit ratings as the cost of servicing their debt rose, according to Moody’s Investors Service. The company’s baseline scenario assumes that all current AAA sovereigns will keep their ratings over the next three years. Under its adverse scenario, which assumes 0.5 percent lower growth each year, less fiscal adjustment and a stronger interest-rate shock, the U.S. will be paying about 15 percent of revenue in interest payments, more than the 14 percent limit that would lead to a downgrade to AA. Achieving the fiscal consolidation necessary to avert a downgrade will test “social cohesion” and may involve rewriting the “social contract” between governments and their people, Cailleteau said. “People have to decide what level of pain they are willing to accept to have a healthy economy.”