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US Rating Cut to AA+ from AAA by Fitch
- appleflaxen 3y agoDoes this increase the interest rate the USG just pay to borrow money?
- woooooo 3y agoNo, all other rates are effectively downstream of the fed rate. It would take many more cracks in the edifice to make them subject to typical market pressures.
- rhaway84773 3y agoIt’s one of the biggest markets in the world. There may be a lot of issues with the US government’s issuance of debt but a lack of market pressure isn’t one of them.
- archo 3y agohttps://archive.is/Syxt1 https://archive.is/Syxt1
- scrlk 3y agoWhen S&P did this back in 2011, the DoJ opened an investigation in to them (regarding their activities in mortgage backed securities), and the CEO resigned pretty quickly as well. Fun fact: Microsoft has a higher credit rating from S&P (AAA) than the US government (AA+) - https://www.microsoft.com/en-us/investor/faq.aspx https://www.microsoft.com/en-us/investor/faq.aspx (Fitch withdrew their MSFT rating at the start of the year, but it was also AAA)
- OJFord 3y agoIt's amusing, but also intuitive? When we have companies larger than countries, operating globally, it sort of stands to reason they should be safer bets than any one country - just like selling mortgages to thousands vs. a massive one to one person, or anything else in finance.
- fieldcny 3y agoThis is just so unbelievably short sited. A country is massively different than a company. A country has the force of law, it has the right to use deadly force when threatened, it can print money, seize assets, tax citizens, jail people, expel people. Like this isn’t just about money and how much you make, that’s what a company is, a country is life or death, peace and prosperity or war and famine. JFC…
- vimax 3y agoI don’t think they were advocating for anything, just describing what we have right now.
- fieldcny 3y agoThe statement was that large companies should be “safer” because they are globally diverse, which completely ignores the fact that government and companies are apples and oranges. As long as you are borrowing in the currency you own, you can print money to pay that debt off, maybe it happens like Weimar Germany where you trigger a painful bought of hyperinflation, but the debt gets paid and there is no default. There is not a company in existence that can say the same thing
- DesiLurker 3y agoLast time this happened (around 2008 crisis) didn't that ultimately led to more capital flowing into US? II(vaguely)RC it was a signaling that a big downturn is ahead and that unpredictably meant lots of capital found safe haven in US assets. in retrospect that may be because European banks were in even worse condition and more leveraged than US. IDK what the situation is currently but major international markets like UK/Japan/China all seem distressed at the moment. So IDK what the material impact for this downgrade ends up being but it does not seems like a big deal.
- OJFord 3y agoYes, a recent Money Stuff (covering the rumoured/leaked/mentioned indication this may happen) gave that example. It does seem to make it a bit meaningless, because what can you do? They could make it BBB- (or BBb or whatever they use) and still nobody would actually be concerned about their US treasuries. It's a bit weird. I suppose Fitch et al. have to be seen to be following a process.
- DesiLurker 3y agothat makes me wonder if US treasuries get labelled below AAA then would that mean (some) pension funds may not invest in them. I think some have obligations to invest only in AAA. but of course we are long way from that as all 3 rating agencies would have to downgrade & thats not happening until default is in rear view mirror.
- OJFord 3y agoHe covered exactly that (and again today on this news: https://www.bloomberg.com/opinion/articles/2023-08-02/the-us-is-more-aa-now https://www.bloomberg.com/opinion/articles/2023-08-02/the-us..., it's free by email but I think unfortunately no (legitimate/non-archive) way to find old columns for free if you weren't subscribed at the time): > When we last talked about this in May, I looked at various rules — for money market funds, for Federal Reserve collateral, for cleared derivatives margin, for bank and insurance capital — until I got bored; all of them say that Treasuries are Treasuries, that they are treated as about as risk-free as it gets, without any reference to ratings. [...] If you have that trade, please email me! If you were allowed to hold Treasuries when they were rated AAA (by Fitch), but not now that they are rated AA+ (by Fitch), I would love to hear about it. But I don’t think there are a lot of those people out there.
- globalreset 3y agoWake up: https://fred.stlouisfed.org/series/A091RC1Q027SBEA https://fred.stlouisfed.org/series/A091RC1Q027SBEA (that's US Government hitting 1 trillion USD in interest payments every year).
- blondie9x 3y agoI used to think this mattered. But like climate change the worse it gets the more the markets ignore it. Until, until what? Not sure.
- gsatic 3y agoThink of a teenager done with their growth spurt. Beyond that point, people stop measuring growth everyday.
- candiddevmike 3y agoGDP growth (how we outpace out interest payments) is most likely counter intuitive to curbing climate change, IMO
- jgalt212 3y agoInflation and default. Two sides of the same coin.
- mo_42 3y agoThis rating is just an opinion of some organization. I have an opinion too: I think the US government has a credit rating of AAA. Why? - The US government can produce as much currency as it needs to because it's a sovereign country. Hence, there is not immediate risk of default. - And even if the US government couldn't produce any more dollars, there are plenty of other ways to get hold of the circulating dollars. After all, Congress can pass laws to raise taxes, seize assets, etc.