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The US Might Be Only AA+
- mikece 3y agoWith the debt we've run up (and continue to expand) combined with the clowns running things in DC it's a wonder our government debt isn't rated on par with junk bonds. EDIT: I find it humorous that people are taking offense and down-voting my comment as though I was referring to only a subset of the people in DC as clowns. We've been running a deficit annually since the early 80s (with one anomalous year in the 90s) and the fact we've not had blow-back in the credit markets is astounding. This is only possible when we enforce the petro-dollar system with the might of the US military, something the rest of the world has grown weary of. Once we lose reserve currency status our gov't debt will indeed slide to junk status and right quick.
- piloto_ciego 3y agoI’m not taking offense, but I think your understanding of geopolitics is a little… I don’t know, simplistic? I’m not trying to say that to be rude, but look… as long as we have the power we have and can browbeat other nations, we cannot and will not be coerced in to making good on our foreign debt. That’s it, that’s the whole reason. The entire global trade system depends on us flattening any bad actors with the threat of force. Other players would like to edge us out, but they can’t yet.
- mikece 3y ago> ...as long as we have the power we have and can browbeat other nations... I think the sunset on that ability is within view. The petro-dollar is key to our status as the world reserve currency and not only is oil now being sold in Rubles and Yuan but the push to eliminate fossil fuels also undermines the special status the USD enjoys.
- thsksbd 3y ago[dead]
- ROTMetro 3y agoCarl Icahn just lost billions betting against the USA. Your comment sounds interesting until you look at all the other countries in the world. We aren't competing with perfect, we're competing with a Europe still coasting off of it's Imperial power and forced wealth extraction from the rest of the world and China, a country whose central government has tangential control on it's regions, government is dependant on the sale of land to raise income, has levels of pollution that was horrific the last time I was there, population is declining when it is dependant on worker power to translate to world power, and brutal repression which does not lead to the independent thought necessary for dynamic intellectual growth. They are now removing economic numbers and discussion for the public and criminally investigating auditors which will surely to lead to a dynamic economic model that will generate growth for them.
- deleted 3y ago[deleted]
- yamtaddle 3y agoJapan, Singapore, and Italy all appear to be a worse off than the US (a lot worse off, in the case of Japan), as far as government-debt-to-GDP ratio. They already lack the benefit the US gets from its "petro-dollar system". Are any of their bonds rated "junk"?
- etskinner 3y agohttps://archive.is/Wu5sY https://archive.is/Wu5sY
- FredPret 3y agoThe US is pretty much the definition of a top credit rating. Besides having the biggest economy, they can print more of the world's reserve currency. Not defending government debt by the way - I think it's an especially insidious form of tax that devalues the entire currency and hits the poor the hardest.
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- Detrytus 3y ago> Besides having the biggest economy, they can print more of the world's reserve currency. Both those things will soon become false - US economy will be eclipsed by China, and the process of de-dollarisation of world's reserves is accelerating. The fact that the US can print as many dollars as they want is one of the reasons for it.
- boc 3y agoSource? Growth rates in China have slowed significantly in the past two years, and demographic collapse is going to render their economy stagnant in the coming decades. Some analysts are reversing their expectation that China will ever pass the US. [1] [1] https://asia.nikkei.com/Economy/China-s-GDP-unlikely-to-surpass-U.S.-in-next-few-decades-JCER https://asia.nikkei.com/Economy/China-s-GDP-unlikely-to-surp...
- DiogenesKynikos 3y agoChina's PPP GDP (which is a more accurate measure of the total size of an economy) is already somewhat larger than that of the US. Slower growth still means about 5% GDP growth per year, which is much higher than growth in developed economies. The "demographic collapse" is a gradual decline in population over many decades, offset by vastly improved education among the younger generation entering the workforce. Just to give you an illustrative example, if three workers with 8 years of schooling retire from the workforce, and two workers with college degrees enter the workforce, is that a demographic collapse?
- ars 3y agoThis whole thing is just a negotiating tactic, no one actually expects the US to default. Except maybe the media who is greatly enjoying the extra views from concerned viewers.
- belter 3y ago> no one actually expects the US to default. That is the definition of a Black Swan. US political parties have audaciously risked the foundations of democracy for the advancement of their own political agendas. It is my forecast that the Speaker of the House's political fragility in ensuring adherence to any concurred deal, may well manifest as the Black Swan, potentially precipitating a default.
- ars 3y agoIf you don't know your political leanings this is a great way to find out: If you actually believe a default is possible you are a Democrat. If you don't think it's possible you are a moderate or a Republican. Read the comments with this in mind and see how people just have such different worldviews.
- Miner49er 3y agoJPMorgan says 25% chance
- TremendousJudge 3y agohttps://xkcd.com/1132/ https://xkcd.com/1132/ bet you 50 bucks it won't happen
- remexre 3y agoThere's no way the Tariff of Abominations will actually _pass_!
- i2cmaster 3y agoA lot of Americans are really tired of some of the things the federal government has been doing and would be more than happy to see it stop by whatever means possible, even if that means some short term economic hardship.
- yrro 3y ago[flagged]
- sremani 3y agoIt's a barbell. The Ironclad guarantee or default, there is no mid-rating for USA. This is just wall street pageantry to drum up noise to get a compromise. If you think it's GOP brinksmanship you are entitled to, but a savvy operator knows, It takes two to tango. edit1: note: the keyword in the above post is 'savvy operator'. I am not taking political sides and happy to bet $1000 that at the end of the hour there will be compromise. I have seen this song and dance before. So please take your political talking points elsewhere.
- Steltek 3y agoThe threat of default has been a tool wielded solely by conservatives. And negotiating with terrorists (destructive threats to achieve political ends) is never "compromise".
- yamtaddle 3y ago> If you think it's GOP brinksmanship you are entitled to, but a savvy operator knows, It takes two to tango. Do you believe the Democrats would decline, if the GOP House offered a "clean" debt ceiling increase?
- deleted 3y ago[deleted]
- jimbob45 3y ago
- inejge 3y agoThe linked article says it plainly: U.S. Treasuries are in a category of their own. But the facade of fair and uniform rules for all is important to keep, so everyone insists on the polite fiction of credit ratings. The cracks only appear when some external event, like the debt ceiling impasse, threatens to undermine that fiction.
- debacle 3y ago2007/2008 showed that there is incredible momentum in credit ratings, and that despite the "rules" there is a log scale relationship with rating, momentum, and risk. The A/B/C rating system might be more of a disservice than a 0-100 scale.
- sudosysgen 3y agoA quantitative scale is too easily backtested, criticized and compared, which means it would threaten the moat that these agencies rely on.
- maxerickson 3y agoHow is bad governance by the US government an external event for US treasuries?
- boc 3y agoThe debt ceiling "debate" is farcical. The House GOP is arguing we shouldn't pay our bills, even when the laws and actions that generated that spending were passed legally through Congress. I'm of the opinion that the WH should simply ignore the debt ceiling, invoke the 14th Amendment, and keep paying our debts as legally required.
- rayiner 3y agoThe debt ceiling is about issuing new debt to fund expenditures. It has nothing to do with paying existing debts, or the 14th amendment. Calling on Biden to bypass Congress is asking him to to violate one of the foundational provisions of Article I. Section 8 makes clear that the power "to borrow Money on the credit of the United States" belongs to Congress.
- ProjectArcturis 3y agoBut if Congress has passed budgets telling the Executive branch how much to tax and how much to spend, and also tells the Executive not to borrow to make up for the shortfall, what is the Executive supposed to do?
- thsksbd 3y ago[dead]
- DaiPlusPlus 3y ago> what is the Executive supposed to do? Personally, I’d like to see what happens if the entire executive branch just goes on-strike, French-style.
- pavon 3y agoThe constitution clearly grants congress with the sole powers to tax and borrow, and nothing in the 14th amendment changes that. Interestingly, it is silent on the power to spend. So while the executive must generally faithfully execute the laws congress passes, if they are in conflict there is no choice but to break one of them, and adjusting spending is the one most within the executives defined powers.
- fabiofzero 3y agoThe US is mid. B+ on really good days.
- GenerWork 3y agoI'm gong to be honest, I don't care about what debt agencies say. I remember the US was downgraded a decade or so ago by another rating agency, and literally no consequences happened because of it.