This is the Cato Daily Podcast for Monday, March 22nd, 2010.

I'm Caleb Brown.

Moody's is sounding warnings about the U.S. bond rating, warning Americans that unless some changes are made the price of our

debt may force some painful spending cuts. Moody's claims that they could test social

cohesion. Mark Calabria, Director of Financial Regulation Studies at the Cato Institute,

comments.

Moody's has put out reports and made comments to the public at large, but directed at the U at the US government and others that the

fiscal situation in the US is simply not sustainable and that at the debt levels

compared to GDP that which the US is approaching really raise questions about the ability

of the US to actually pay that debt back in, you know, 100 cents on the dollar in the way it was borrowed.

So what Moody's is raising questions about is essentially are they going to have to downgrade because the US Treasury debt is now currently AAA or they have to downgrade that to reflect an increased chance that the US might actually not pay it back.

The United States is not alone in that position.

Of course not.

And in some sense, the US is in a better position than many other countries because the dollar is essentially

the reserve currency of the world.

One of the things the US does not face as much is the risk that, I mean for instance all of

our debt is sold in dollar

denominated. So you know we sell a US Treasury to someone every season they buy

it in terms of dollars. A lot of other countries sell their debt in a

currency other than their own. So not only do they have to bear default risk, credit risk

of the instruments, but they also have to bear currency risk on those instruments. And that

tends to be an even bigger risk. So in some sense

...