Slowly, Then Suddenly

Democrats It's Probably Nothing RINO 27 Comments

Fitch downgrades USA long-term credit rating to AA+ from AAA

The rating downgrade of the United States reflects the expected fiscal deterioration over the next three years

• Cites repeated debt limit standoffs and last-minute resolutions
• In Fitch’s view, there has been a steady deterioration in standards of governance over the last 20 years
• We expect the general government deficit to rise to 6.3% of GDP in 2023, from 3.7% in 2022
• Fitch forecasts a GG deficit of 6.6% of GDP in 2024 and a further widening to 6.9% of GDP in 2025
• The interest-to-revenue ratio is expected to reach 10% by 2025 (compared to 2.8% for the ‘AA’ median and 1% for the ‘AAA’ median)

This is huge and follows S&P downgrading the USA on August 5, 2011. The last episode sparked a major risk-off turn (and even got its own wikipedia page) and this one is likely to do the same, if not worse because now two-out-of-three of the US credit rating agencies have the US at sub-AAA.

Woman running world: Yellen “strongly disagrees” with Fitch’s decision

27 Replies to “Slowly, Then Suddenly”

      1. Unfortunately not the beginning of the end, merely a tactical manoeuver to maintain power by the not-conservative wing of the uni-party in the UK. Sunak does not deny the global warming Blarney Science, he will merely say it should be Net zero in 2050, not 2035. The man doesn’t give a fart-thing for this BS and he already can afford his own private jet.

    2. Actually that can be bullish for the dollar, since it implies higher rates on deposits and bonds. This will offset the flight from USD for some time. The yield curve inversion makes for an interesting carry trade … in reverse.

  2. I wonder what Canada’s rating is?
    Also reminds me of Bob Rae when he was unexpectedly elected Premier of Ontario in the early 90’s. He was going to spend money like a drunken sailor and then the bond ratings came in and he had to institute “Rae Days” in which provincial government employees worked only 4 day weeks for 4 days of pay. Lots of yelling and screaming by the employees!

    1. For my dad that meant a 20 percent pay cut, because some people have to go to work or bad things happen.

    2. I have to jump in defend drunken sailors, since that analogy is constantly misused.

      Unlike the s***bags running government, drunken sailors spend their own money.

      1. And drunken sailors stop spending when they run out of money.

        When s***bags running government run out of your money, they increase spending by borrowing against your grandchildren’s future earnings. And when that isn’t enough, they start printing it. Zimbabwe economic theory.

    1. The rating agencies always arrive late to the party. I doubt AA+ differs much from AAA at the end of the day (not that
      AA+ is deserved!).

      1. Actually AAA is warranted as the country can just print the interest payments. Rating agencies are not involved in whether the money is still worth anything.

        1. Bingo. The US has essentially ZERO default risk.

          I expect some nasty little crypto trap will help soak excess dollars out of everyone’s pockets … controlled demolition of markets is a thing. The Fed now trades futures, ETFs and yes, crypto, to manage the USD supply. Tank the market a few times, and you repatriate a lot of excess middle class dollars back into Treasury if you are the Fed, on the opposite side of the trade. Then use said dollars to honour coupon and notional payments.

    1. Spoiler Alert: Get your Gold now before the numerous sovereign defaults and the mandated CBDCs and before everyone else scrambles to get Gold. The US is beyond any hope of repayment and balanced budgets. Canada’s sovereign debt isn’t quite as bad but personal / household debt is higher.

      1. Buy it in grams and small coins it keeps a higher value easier to trade for rainy day stuff needs.

      2. Gold and silver both. Maybe even a little platinum or palladium too?

        And a couple thousand cold hard cash. Maybe even some foreign money too.

        Buy it, but don’t let anyone else know. Keep it in a safe deposit box(es).

  8. Insider Paper @TheInsiderPaper 1h
    REACTION: US Treasury Secretary Janet Yellen expressed firm disagreement Tuesday after a downgrade to the United States’ long-term ratings from AAA to AA+, following repeated debt limit standoffs in the country

    Insider Paper @TheInsiderPaper 22m
    BREAKING: White House says ‘strongly’ disagrees with Fitch ratings downgrade.

    BTW…
    BREAKING: Biden at movie theater to watch Oppenheimer, according to White House pool report

  9. The Troll under the bridge has to pretend our? money is worth something..

    Socialism demanded fiat currency.. The new woman voters wanted man replacement and we got endless war instead.. The boys got their toys and the girls got their money.. Debt numbers beyond understanding undermines said value of the currency..

    The bubble is supposed to be invisible.. Not a running joke..

    Then one day democracy WOKE up to the fact that hey could vote themselves anything they wanted.. Politicians were happy to oblige.. Its not like they are going to be around in 10 years.. Debt beyond understanding..

  10. Why would it matter that Yellen disagrees? The Fitch downgrade happens regardless of what she thinks. The United States faces immediate interest rate increases regardless of her views. The Biden administration earned this by deliberately reduced the credit worthiness of the US. Yellen is nothing more than the merkin covering the Biden economic mismanagement. The Fitch decision is simply the penalty they have to pay.

    She can squeal all she likes; no one cares, and it will have no effect.

  11. My employer does a lot of work for a large vendor of livestock equipment, particularly for hogs. That vendor tells us that thanks to a smaller crop than normal and the relentless uptick in interest rates, sales have slowed dramatically. Many projects like new barns and barn retrofits are being postponed. I doubt that this is the only industry looking at a slowdown.

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