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Fitch downgrades US' long-term ratings from 'AAA' to 'AA+'

Discussion in 'BBS Hangout: Debate & Discussion' started by AroundTheWorld, Aug 2, 2023.

  1. AroundTheWorld

    AroundTheWorld Member

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    Surprised there wasn't a thread on this yet. A scathing indictment of the current government's fiscal policies.

    https://www.foxbusiness.com/economy/fitch-downgrades-us-long-term-ratings-aaa-aa

    Fitch downgrades US' long-term ratings from 'AAA' to 'AA+'
    Ratings agency expects 'fiscal deterioration' of US 'over the next three years'

    Fitch announced Tuesday it has officially downgraded the United States' long-term foreign-currency issuer default rating to "AA+" from "AAA," saying the downgrade "reflects the expected fiscal deterioration" and the nation's heavy debt burden.

    The ratings agency pointed the America's "erosion of governance," rising deficits, and tightening by the Federal Reserve. It also said its expects the U.S. economy to slip into a mild recession in the fourth quarter.

    U.S. Treasury Secretary Janet Yellen issued a statement pushing back on Fitch's move, saying the rating agency was using old data and arguing conditions have improved under the Biden administration.

    "I strongly disagree with Fitch Ratings’ decision," Yellen's statement said. "The change by Fitch Ratings announced today is arbitrary and based on outdated data."

    "Fitch’s quantitative ratings model declined markedly between 2018 and 2020 – and yet Fitch is announcing its change now, despite the progress that we see in many of the indicators that Fitch relies on for its decision," she continued. "Many of these measures, including those related to governance, have shown improvement over the course of this Administration, with the passage of bipartisan legislation to address the debt limit, invest in infrastructure, and make other investments in America’s competitiveness."

    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.

    The agency also said it expects the US federal deficit to grow from 3.7% of GDP in 2022, to 6.3% of GDP in 2023.


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    #1 AroundTheWorld, Aug 2, 2023
  2. tinman

    tinman 999999999
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    #2 tinman, Aug 2, 2023
  3. adoo

    adoo Member

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    Prominent economists Larry Summers and Mohamed El-Erian, both critics of Bidenomics, joined a cohort of their peers in criticizing Fitch Ratings’ decision to downgrade the US Debt given signs of resilience in the world’s largest economy
    • Former Treasury Secretary Summers said while there are reasons for concern about the long-run trajectory of the US deficit, the country’s ability to service its debts wasn’t in doubt.
    ​
    • El-Erian, chief economic adviser to Allianz SE, said the downgrade was “a strange move” that was unlikely to impact markets.


    ​
    Jamie Dimon, JP Morgan's CEO, Calls Fitch Downgrade ‘Ridiculous’


    “I would point out to the rating agencies if I could that there are a bunch of countries rated higher than us, like AAA, but they live under the American enterprise military system.
    To have them be AAA, and not America, is kind of ridiculous,”
     
    #3 adoo, Aug 2, 2023
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  4. Xerobull

    Xerobull ...and I'm all out of bubblegum
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    • Was talking to my wife five minutes ago about the actor William Fitchner
    • Which naturally led me to think of Bill Fitch
    • Then @tinman tags me in this thread about Fitch and AAA ratings
    • Then my 5yo runs by screaming ‘aaaaaaa!’
    The universe is too meta for me today brehs.

    [​IMG]
     
    #4 Xerobull, Aug 2, 2023
    B-Bob, Nook, Ubiquitin and 1 other person like this.
  5. dmoneybangbang

    dmoneybangbang Member

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    Fitch also listed the debt ceiling standoff as a major reason as it pointed to deteriorating governance.

    The US has levers it can pull to increase revenue and/or decrease spending, it's the government that is the issue.
     
    #5 dmoneybangbang, Aug 2, 2023
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  6. Invisible Fan

    Invisible Fan Member

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    Bruh...

    It's like saying a morbidly fat person has levers it can pull to increase caloric outtake and/or decrease spending money on food, it's the decision making that is the issue.

    We're starting to reach the "I can't fit outside the door" status... but that's okay. Door Dash changes everything!
     
    #6 Invisible Fan, Aug 2, 2023
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  7. dmoneybangbang

    dmoneybangbang Member

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    Eh, there's a reason why Fitch specifically called out the debt ceiling showdown. Despite the scary numbers.... the US is still a massive country geographically with untapped resources/reserves compared to a small island nation like Japan or the fragmentated and geographically smaller Western European countries. It may sound dismissive, it's not meant to be, but the US is a very unique case.

    We certainly have our troubles and some tough decisions, but we have pretty fantastic demographics and geography which are historically tailwinds. And again, what you spend on or how you tax matters a lot.
     
    #7 dmoneybangbang, Aug 2, 2023
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  8. dmoneybangbang

    dmoneybangbang Member

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    And to be clear, I think Fitch's move is a good kick to the US's rear-end.

    Microsoft has a better rating than the US govt now.... FYI
     
    #8 dmoneybangbang, Aug 2, 2023
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  9. Invisible Fan

    Invisible Fan Member

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    Fair enough, though I think people are now accustomed to the covid bailouts of helicopter money. Bit skeptical people will decide to trim back if they're not forced to.

    The illusion of free money doesn't jive with talks of credit worthiness and fiscal responsibility.

    ...


    In case anyone's interested, NYT ran an infographic on what it'd need to take to balance the budget.

    https://www.nytimes.com/interactive/2023/03/06/upshot/balancing-budget-painful-spending-cuts.html

    Even then the savings were ~ 7T over 10 years, or roughly the amount Trump and now Biden ran up.
     
    #9 Invisible Fan, Aug 2, 2023
    Last edited: Aug 2, 2023
  10. adoo

    adoo Member

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    back in 2011, there was a debt ceiling crisis and US debt was downgraded the first time in history; Standard & Poor issued the downgrade, but not Fitch who maintained a AAA ratng for the US debts.

    this time, w a debt ceiling crisis, Fitch issues the downgrade, but not Standard & Poor, ¯\_(ツ)_/¯
     
    #10 adoo, Aug 2, 2023
  11. astros123

    astros123 Member

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    Wonder what they rate the republican credit at?
     
    #11 astros123, Aug 2, 2023
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  12. B-Bob

    B-Bob "94-year-old self-described dreamer"
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    This definitely deserves its own thread, so thanks!

    On "current government's fiscal policies," I would instead say basically "this century's US fiscal policies." I'm not defending the current Congress or Whitehouse or anything, but our federal government has been writing big checks (and its an executive and legislative collaboration of course) since 9/11/2001 or before.
     
    #12 B-Bob, Aug 3, 2023
  13. Xerobull

    Xerobull ...and I'm all out of bubblegum
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    After I posted this, a book I was reading referenced AAA (the motorist assistance company). Precognition? Gematria? Post menopaused?

    [​IMG]
     
    #13 Xerobull, Aug 3, 2023
    Last edited: Aug 3, 2023
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