Investment guru Marc Faber says the U.S. deserves to see its triple-A credit rating replaced with a junk designation.
Moody’s Investors Service warned last week that the U.S. could suffer a rating downgrade unless economic growth exceeds expectations or the government shows more willingness to reduce the budget deficit.
Treasury Secretary Tim Geithner said over the weekend that the U.S. will never lose its triple-A rating.
“I wouldn’t listen very much to the Treasury Secretary,” Faber, publisher of the Gloom Boom & Doom Report, told Bloomberg.
“If you add all the unfunded liabilities the U.S. has in terms of Medicaid, Medicare and Social Security, then obviously if the U.S. were a corporation, it wouldn’t be a triple-A, but would have bonds that are junk rated,” he said.
While Treasury bonds have rallied recently, Faber doesn’t see that as a sign of economic strength.
“The reason that U.S. bonds are being bought by investors is that a lot of them don’t buy for a 10- or 30-year holding period, but just as a trade. And they’re being bought by other central bankers who aren’t much better than Mr. Bernanke,” he said.
Jeffrey Garten, former dean of Yale’s School of Management, also is concerned about the U.S. position.
“Something’s changed,” he told The New York Times.
“Our relative decline is now acknowledged. The possibility that the U.S. may not be the world’s best credit risk is now discussed. And that’s significant, because so much of this is psychological,” he said.
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