Golden Hope Mines

The markets have been embroiled recently by the debt ceiling debate, the potential debt downgrade of the U.S., and the likely new recession that will come from the austerity measures. For now, the U.S.s triple-A rating appears to be secure, but only temporarily. When we last covered the full list of nations that still have triple-A ratings from key credit rating agencies our point was simple: there are some strong triple-A nations and some weak triple-A nations. As of today, there are many more weak triple-A ratings than there were just six months ago.

Moodys has already affirmed the U.S. governments Aaa rating, but with a negative outlook. Fitch also affirmed its AAA rating for the U.S., but warned that the rising debt profile to over 100% of GDP (after 2012) is not consistent with retaining the crucial AAA sovereign rating.
As a result of the weakening economy, and following the ratings agency actions, 24/7 Wall St. has decided to reassess the entire global triple-A landscape. Our previous take was that some nations already seemed to be far less deserving of the triple-A rating category than others. The key assumption here is that the U.S. is no longer a true triple-A- rated nation. This implies that other nations with similar conditions are also at risk of losing their triple-A rating, and that there are really far fewer than 17 true nations in the triple-A club now. Our review includes updated figures from Standard & Poors and Moodys along with revised statistics from the CIA World Factbook. Weve sourced also from the Economist Intelligence Unit, Fitch, Egan Jones, and elsewhere.

S&P still has a triple-A rating on Australia, Austria, Canada, Denmark, Finland, France, Germany, Netherlands, Norway, Singapore, Sweden, Switzerland, the United Kingdom, and the United States. Other triple-A nations like Guernsey, Isle of Man, Liechtenstein, and Luxembourg we left out due to their small size and dependence upon other nations. Moodys ratings were also used to make sure that the discrepancies are not overlooked.

The writing is on the wall. The U.S. can still count itself as a triple-A nation, but not indefinitely and not even for too much longer. Even the newly agreed debt-ceiling deal will not keep a downgrade from coming at some point in the intermediate-term if the hints from the ratings agencies are serious. Keep in mind that Japan lost its AAA rating in the late 1990s. It was further downgraded earlier this year. It was as recently as 2009 that S&P cut Irelands AAA rating. Italy and Spain were both AAA rated in the 1990s, but Spain was actually raised back to AAA before losing it again in 2009.

Safe AAA:

1. Australia
> GDP per capita: $39,699.358
Australia was a solid AAA earlier this year and nothing has changed. Sure, it faces pressure from floods earlier this year, but the country is rich in natural resources that have to be used to build the world whenever the economy rises again. The low population of 21.5 million, an $882.4 billion GDP in 2010 projections, vast resource reserves, lower labor costs, and a low unemployment rate all act as a shield of global woes. Its public debt for 2010 was only projected to be 22.4% of GDP. The AAA rating is stable at S&P, and at Moodys its Aaa with a stable outlook.

2. Canada
> GDP per capita: $39,057.444
Canada has a solid triple-A rating, and its deep trading ties to the U.S. does not jeopardize it, even if the U.S. has a troubled triple-A with a negative outlook. Canada has vast natural resources and its citizens mostly avoided the real estate and debt bubble that hurt the U.S. The population is under 34 million, its GDP is about $1.33 trillion, and public debt at the end of 2010 was a mere 34% of projected GDP. Neither Moodys nor S&P have any issues with the triple-A ratings and stable outlook, and our take is that Canada is perhaps the safest triple-A rating of all nations in the Western Hemisphere.

3. Denmark
> GDP per capita: $36,449.554
Denmark has a relatively strong economy and claims a well educated population. The nation has a large dependence on foreign trade for goods and services and a small population of just over 5.5 million. Revised GDP data was put at $201.7 billion. What helped Denmark so much is that it had a surplus in its balance of payments before the government started spending to drive the economy. Its high property prices are a concern, as is a slowing trade environment. S&P has a solid AAA with a stable outlook and Moodys has a Aaa with a stable outlook. The country has kept the Danish Kroner rather than officially joining the euro. Low birth rates, an aging population, taxation, immigration trends, and climate change are all risks for the small country longer-term by our count. However, Denmark has a sub-5% unemployment rate and a 2010 debt to GDP of only 46.6%. Denmarks triple-A status remains firm here unless its services sector gets hit too hard with land prices all over again.

4. Germany
> GDP per capita: $36,033.284
Germany is still what we call King of the Euro with what is now just an undervalued Deutsche mark. With a population of 81.4 million and having the No.5 global economy, it cannot avoid leading the eurozone bailouts. GDP was $2.94 trillion in 2010 and its unemployment rate is healthy for a European nation. It also has a highly skilled labor force. The growing pains of absorbing East Germany are behind it and the ratings agencies bring no quarrel with its triple-A rating. Budget deficits, subsidies, tax cuts, aging population trends, immigration and the obvious leadership in eurozone bailouts do pose a risk. Still, public debt is tolerable at 78.8% of 2010 GDP. While any continued spending would pose longer-term risks, our take is that Germany will keep a triple-A rating longer than most nations.