The Briefing Room
General Category => Economy/Business => Topic started by: mystery-ak on August 03, 2023, 02:19:41 pm
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The odd logic to Fitch's US debt downgrade
Neil Irwin
Fitch Ratings downgraded its assessment of the U.S. government's creditworthiness Tuesday afternoon, declaring that Uncle Sam is a mere AA+ rated credit, no longer AAA.
The big picture: It was a weird decision, not because the U.S. fiscal outlook is pretty (it isn't) but because of Fitch's stated reasons.
Why it matters: The U.S. government does face tough fiscal tradeoffs in the decade ahead, with interest costs poised to eat up a growing share of the economy, deficits crowding out private investment and Social Security facing steep automatic cuts in 2033.
But the issue isn't so much one of creditworthiness, as implied by the Fitch downgrade. It's when, and on what terms, those adjustments happen.
What they're saying: In their downgrade, Fitch analysts cited "the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance" compared to peers "over the last two decades that has manifested in repeated debt limit standoffs and last-minute resolutions."
They also note a potential recession ahead.
Fitch analysts also reportedly raised the issue of the January 6, 2021, insurrection at the U.S. Capitol as a warning sign of governance problems in conversations with U.S. officials.
more
https://www.axios.com/2023/08/02/fitch-downgrade-us-rating
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With all due regard, it is a matter of creditworthiness; what the downgrade indicates is that there is now a greater risk of a potential U.S. government default on its debts - the risk is still small, hence a rating that's still investment grade, but the risk is increased.
That is a credit risk, and that is what the change is communicating.
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Fitch has been threatening to lower the debt rating for years now... why now?
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Fitch has been threatening to lower the debt rating for years now... why now?
The recent idiocy with blowing out the spending and the debt, and the continuing refusal to deal with reining the debt in.
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Again, the last time congress passed a budget was around 2009... It has been continuing resolutions ever since, including when Republicans controlled congress and the Presidency. Shameful... That's Banana Republic economics...
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Fitch has been threatening to lower the debt rating for years now... why now?
It is obvious election interference. They want Biden out. /s
Maybe this has something to do with it:
https://www.gopbriefingroom.com/index.php/topic,507650.0.html
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We should count ourselves lucky we aren't junk bond status by now.
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We should count ourselves lucky we aren't junk bond status by now.
We will be eventually.
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We will be eventually.
We should have been 20 years ago, but unfortunately most of the rest of the world is worse off than we are.