Back in 2011, the U.S. lost its AAA credit rating from Standard & Poor’s, one of the largest credit rating agencies. That’s the highest it goes and the U.S. now sits just below that at AA+.
For a while three companies had higher credit ratings than the U.S. government. Although, ExxonMobil (NYSE: XOM) lost that claim to fame back in 2016. And that makes sense with the crash in oil prices. The oil industry is struggling.
Now, the only two companies with better credit ratings are Johnson & Johnson (NYSE: JNJ) and Microsoft (Nasdaq: MSFT). It’s insane to think that two companies are considered more creditworthy than the U.S. government… or is it?
With the recent rounds of deficit spending, I wouldn’t be surprised to see another credit downgrade to the U.S. government. Although, giving the U.S. government a credit rating is a bit odd to start with. It has complete control of fiscal and monetary policy. So, it can simply print new money to pay off all its past debts.
Now, that approach gets complex quickly and I don’t want to get too much into the weeds. But if you’re interested in a deeper dive just let me know. Maybe I’ll put together a video on Modern monetary theory.
This is just a quick update today and I’ll leave you with one last thought, even though Johnson & Johnson and Microsoft have better credit ratings, their bonds still have higher yields. So, they’re more creditworthy and provide higher returns than the U.S. government.