The Empire of Debt gets a sovereign downgrade!

[zugzwang]

Borrowing a trillion dollars every six months not the key to future prosperity. Who knew?

 

https://www.theguardian.com/us-news/2023/aug/01/us-credit-rating-downgraded-fitch-white-house

Rating agency Fitch downgraded the US government’s top credit rating on Tuesday, a move that drew an angry response from the White House and surprised investors.

Fitch downgraded the United States to AA+ from AAA, citing fiscal deterioration over the next three years and repeated down-the-wire debt ceiling negotiations that threaten the government’s ability to pay its bills. It is the second major rating agency after Standard & Poor’s to strip the US of its triple-A rating.

Fitch had first flagged the possibility of a downgrade in May amid the US debt ceiling negotiations, then maintained that position in June after the crisis was resolved, saying it intended to resolve the review in the third quarter of this year.

After the announcement, the dollar fell across a range of currencies, stock futures ticked down and Treasury futures rose. But several investors and analysts said they expected the impact of the downgrade to be limited.

The move came despite the resolution of the US debt ceiling crisis two months ago. Joe Biden and the Republican-controlled House of Representatives reached a debt ceiling agreement in May following months of political brinkmanship. The deal lifted the government’s $31.4tn borrowing limit.

“In Fitch’s view, there has been a steady deterioration in standards of governance over the last 20 years, including on fiscal and debt matters, notwithstanding the June bipartisan agreement to suspend the debt limit until January 2025,” the rating agency said in a statement.

“The repeated debt limit political standoffs and last-minute resolutions have eroded confidence in fiscal management,” it said.

Janet Yellen, the US Treasury secretary, said she disagreed with Fitch’s downgrade, in a statement that called it “arbitrary and based on outdated data”.

The White House had a similar view, saying it “strongly disagrees with this decision“.

“It defies reality to downgrade the United States at a moment when President Biden has delivered the strongest recovery of any major economy in the world,” said Karine Jean-Pierre, the White House press secretary.

Investors use credit ratings to assess the risk profile of companies and governments when they raise financing in the debt capital markets. Generally, the lower a borrower’s rating, the higher its financing costs.

[HousePriceTooHigh]

Carefule, the US might send some F35's to "fly by" the Fitch offices and remind them who is king..........

[spyguy]

Answer me this -

How can the dollar, which the USGOV prints and the largesy reserve currency and main currency used for trade be a credit risk?

A value risk maybe, though the last few years shows the $ is much stronger than any peer - although $ is peerless.

This sounds like diversity hires at the helm.

 

 

[spyguy]

God Im agreeing with Larry the moron

Economist Lawrence Summers, a Treasury secretary in the Clinton administration, also criticised the announcement. “The United States faces serious long-run fiscal challenges. But the decision of a credit rating agency today, as the economy looks stronger than expected, to downgrade the United States is bizarre and inept,” he wrote on Twitter.

 

[spyguy]

“The US credit rating is singular — there is no general methodology for rating the world’s pre-eminent safe haven asset,” said Edward Al-Hussainy, a senior analyst at Columbia Threadneedle. “Fitch is attempting to send a signal about the debt ceiling process and the current fiscal trajectory.

Both are views on the US politics rather than policy,” he added.

[PeanutButter]

Those sons of Fitches!

Nicely done lol

[Armus]

1 hour ago, zugzwang said:

Janet Yellen, the US Treasury secretary, said she disagreed with Fitch’s downgrade, in a statement that called it “arbitrary and based on outdated data”.

The White House had a similar view, saying it “strongly disagrees with this decision“.

Comedy gold 😄

(I know someone will say it so, just for clarity, I would think the same thing if a Republican White House made similar comments).

[zugzwang]

51 minutes ago, PeanutButter said:

Those sons of Fitches!

Nicely done lol

Long overdue and very welcome.

[Staffsknot]

1 hour ago, zugzwang said:

Borrowing a trillion dollars every six months not the key to future prosperity. Who knew?

 

https://www.theguardian.com/us-news/2023/aug/01/us-credit-rating-downgraded-fitch-white-house

Rating agency Fitch downgraded the US government’s top credit rating on Tuesday, a move that drew an angry response from the White House and surprised investors.

Fitch downgraded the United States to AA+ from AAA, citing fiscal deterioration over the next three years and repeated down-the-wire debt ceiling negotiations that threaten the government’s ability to pay its bills. It is the second major rating agency after Standard & Poor’s to strip the US of its triple-A rating.

Fitch had first flagged the possibility of a downgrade in May amid the US debt ceiling negotiations, then maintained that position in June after the crisis was resolved, saying it intended to resolve the review in the third quarter of this year.

After the announcement, the dollar fell across a range of currencies, stock futures ticked down and Treasury futures rose. But several investors and analysts said they expected the impact of the downgrade to be limited.

The move came despite the resolution of the US debt ceiling crisis two months ago. Joe Biden and the Republican-controlled House of Representatives reached a debt ceiling agreement in May following months of political brinkmanship. The deal lifted the government’s $31.4tn borrowing limit.

“In Fitch’s view, there has been a steady deterioration in standards of governance over the last 20 years, including on fiscal and debt matters, notwithstanding the June bipartisan agreement to suspend the debt limit until January 2025,” the rating agency said in a statement.

“The repeated debt limit political standoffs and last-minute resolutions have eroded confidence in fiscal management,” it said.

Janet Yellen, the US Treasury secretary, said she disagreed with Fitch’s downgrade, in a statement that called it “arbitrary and based on outdated data”.

The White House had a similar view, saying it “strongly disagrees with this decision“.

“It defies reality to downgrade the United States at a moment when President Biden has delivered the strongest recovery of any major economy in the world,” said Karine Jean-Pierre, the White House press secretary.

Investors use credit ratings to assess the risk profile of companies and governments when they raise financing in the debt capital markets. Generally, the lower a borrower’s rating, the higher its financing costs.

Wasn't it someone like yourself who said ratings agencies are useless political tools when China was downgraded a few years back and went on a big rant about them being meaningless... make your mind up

Edited August 2, 2023 by Staffsknot
Typos

[Maghull Mike]

Usually if rates go up, oil/Gold fall..............not this time & Opec+ are cutting again.

The World has sussed that they better off leaving it in the ground than chase endless "Fiat".

 

Mike

[Maghull Mike]

https://nitter.net/LukeGromen/status/1686516760680214528#m

[zugzwang]

57 minutes ago, spyguy said:

Answer me this -

How can the dollar, which the USGOV prints and the largesy reserve currency and main currency used for trade be a credit risk?

A value risk maybe, though the last few years shows the $ is much stronger than any peer - although $ is peerless.

This sounds like diversity hires at the helm.

 

 

The US national debt has exploded 6x in the last two decades. The economy is critically dependent on financial tributes from its colonies overseas. If those colonies are in recession - and they are - then who will purchase the vast tranches of US Treasury debt that Coma Joe is using to finance his 'butter and guns' economy. China won't subsidise America's continued fiscal incontinence. The BRICs want to usurp the USD as global reserve because of the Russia sanctions.

It's a Brownian mirage and it's being put to the sword.

[Up the spout]

Champagne corks are popping in Pyongyang, Moscow, Tehran, Beijing, Baghdad, Caracas, Sheffield, Amarillo, Addis Ababa, Bromley, and Al Hudaydah, as financial illiterates worldwide welcome the end of the dollar hegemony. 

[msi]

24 minutes ago, Up the spout said:

Champagne corks are popping in Pyongyang, Moscow, Tehran, Beijing, Baghdad, Caracas, Sheffield, Amarillo, Addis Ababa, Bromley, and Al Hudaydah, as financial illiterates worldwide welcome the end of the dollar hegemony. 

bit harsh putting Sheffield in that list. 

Bromley I can agree with   

Don't forget Maghull too

[spyguy]

40 minutes ago, zugzwang said:

The US national debt has exploded 6x in the last two decades. The economy is critically dependent on financial tributes from its colonies overseas. If those colonies are in recession - and they are - then who will purchase the vast tranches of US Treasury debt that Coma Joe is using to finance his 'butter and guns' economy. China won't subsidise America's continued fiscal incontinence. The BRICs want to usurp the USD as global reserve because of the Russia sanctions.

It's a Brownian mirage and it's being put to the sword.

So has the world economy.

Thast it - the $ isnt connected to te USeocnomy, its world trade.

In fact, as it satnds the world *neesd* the US debt t expand to allwo the world to trade.

Until everyone else works out another means of transacting trade deals and and syntehtic reserve currency then the $ is all theyve got.

 

 

[Up the spout]

Sheffield is much more Al Qaeda-y than anywhere around the Mersey, I saw it in the documentary '4 Lions'.

[zugzwang]

42 minutes ago, Up the spout said:

Champagne corks are popping in Pyongyang, Moscow, Tehran, Beijing, Baghdad, Caracas, Sheffield, Amarillo, Addis Ababa, Bromley, and Al Hudaydah, as financial illiterates worldwide welcome the end of the dollar hegemony. 

HPC cheering for Wall Street now? Colour me unsurprised. 😆

[zugzwang]

10 minutes ago, spyguy said:

So has the world economy.

Thast it - the $ isnt connected to te USeocnomy, its world trade.

In fact, as it satnds the world *neesd* the US debt t expand to allwo the world to trade.

Until everyone else works out another means of transacting trade deals and and syntehtic reserve currency then the $ is all theyve got.

 

 

Borrowing an additional $1 trillion every six months is financing the Empire and its forever wars not world trade. Working out a replacement for the USD (and the World Bank/IMF etc) is exactly what the BRICs and the Global South are doing right now. This downgrade is only going to accelerate that process.

 

[Up the spout]

1 minute ago, zugzwang said:

HPC cheering for Wall Street now? Colour me unsurprised. 😆

How anyone can be so confused by a comment beggars belief, I'd a see a doc for brain damage.

[zugzwang]

2 minutes ago, Up the spout said:

How anyone can be so confused by a comment beggars belief, I'd a see a doc for brain damage.

You are aware that Wall Street banks are the originators of USD denominated debt, right? That the Fed's Open Market trading desk (The Desk) is also located on Wall Street?

 

[Up the spout]

10 minutes ago, zugzwang said:

You are aware that Wall Street banks are the originators of USD denominated debt, right? That the Fed's Open Market trading desk (The Desk) is also located on Wall Street?

I'm also aware my point is about Fitch's small change of rating having little effect, but feel free to make it about whatever you can fever-dream up.

[nero120]

4 hours ago, HousePriceTooHigh said:

Carefule, the US might send some F35's to "fly by" the Fitch offices and remind them who is king..........

What are they gonna do, crash on them?! 

[Maghull Mike]

https://nitter.net/BhadraPunchline/status/1686636251758153729#m

Not happy about the BAN on POPPY production?...................

[Maghull Mike]

The Plumber from Poland will soon be the Plumber from Britain!

HCF.............. Human capital flight

 

 

[reddog]

Obviously I take the point that the US is the reserve currency, they can print, so...how can they ever default?

 

But they really seem to have taken things up a gear in terms of spending since the start of COVID (which is really saying something considering their already profligate ways).

 

I think they are no doing 6% ish deficits every year with no plans to pull back.

 

The inflation reduction act is pure pork barrel craziness.

 

So it is no really a suprise they have received a downgrade, even if they can technically print all their debts.  (Isn't this true for all currencies?  I guess if other currencies get to our of control they are told they can only borrow in dollars though)