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Fitch downgrades U.S. after debt limit stalemate
- zmgsabst 3y agoWhat are the practical effects of this?
- rozenmd 3y agoNormally, interest rates for debt increase as lenders factor in additional risk. Realistically with it being the USA, probably not a large impact.
- pestatije 3y agomakes them more trustworthy than say moodys or standard & poors, especially after the subprime debacle
- stephen_g 3y agoCredit ratings of countries that control their own central bank and only issue bonds in their own currency are kind of just make-believe. They only matter as much as people play along… Although the debt limit thing is a risk, there’s no practical or financial reason why the US would ever default on its bond payments, but the debt limit brinkmanship creates a potential to default due to politics (for no real reason).
- jwestbury 3y agoThey're not make-believe. Plenty of insurance companies and pension funds can only invest in AAA-rated investments. Will their policies change to accommodate downgrades? Possibly. But there's a very real risk of lessened demand for treasuries.
- Someone 3y agoThere may be investment funds that have internal rules limiting how much they can invest in lower rated countries. Fitch isn’t the primary rating agency, the downgrade is fairly small, and this being about the USA, I don’t expect huge effects, though.
- thriftwy 3y agoI'm not sure how any other vehicle may have better rating than U.S. If U.S. somehow fails, then it's all at large.
- roenxi 3y agoThe US has proven quite willing to just take assets off Russians for political reasons. Fitch probably isn't going to say it outright; but if a country has a record of saying "nah, I'm taking it back" about someone else's assets then it seems reasonable to rate them below an AAA. Even if the US doesn't fail, it isn't really credible to claim its debt is an AAA security. For a lot of participants in the market there is an obvious risk that the US will take their money and not return it.
- htfu 3y agoUnfortunately only freezing. In a more reasonable world yes they'd be taken and used for restoration (you break it you buy it), nothing political about it either. Nor does it have anything whatsoever to do with this.
- willcipriano 3y agoI agree the assets of defence contractors, politicians who voted in favor of war and their families in the United States should all be nationalized and used to repair the smoking crater left in the middle east. Oh you weren't talking about those war crimes? Only the one's the media tells you to be mad at? Rachel Maddow would know what is justified in war, given she was just the keynote speaker at a weapons manufacturers conference.
- thriftwy 3y agoImagine you are buying some coal from a dude and that dude settles with getting an IOU note from you. Later on, you decide you no longer have to honor that IOU debt because you no longer like what that dude does with other people. You've also put that coal to a good use. A win-win for you.
- 3y ago
- avidphantasm 3y agoThis may be a chink in the armor, but so long as the USD still the dominant reserve currency and oil is mostly traded in dollars, does anyone care what Fitch thinks? Now there may be some movement away from USD for both of these uses, but I think this has more to do with geopolitics than what Fitch thinks or the petulance of the GOP.
- sgift 3y agoAfaik there are companies/investment products which can only invest in AAA. As long as two of three rating agencies said the US was still AAA they could probably argue that that counts. Now that it's 1/3 that probably won't work anymore.
- bombcar 3y agoThe smarter ones have a phrase like “US treasuries or AAA rated securities” or similar. People who aren’t familiar with the bond market would be surprised to learn all the ways you can lose money on perfectly secure bonds - if you have to sell before maturity.
- cced 3y agoWho cares if the world is signalling that they are starting to think about getting off the dollar and credit agencies are downgrading the US? Saudi Arabia is also talking about accepting Yuan as an alternative to USD. Here we have three signals among others, go ahead and ignore them I guess…
- bombcar 3y agoThe key is that you can always dump dollars into US bonds. Any alternative currency needs something similar, until they have that sink it doesn’t really matter.
- lotsofpulp 3y agoThey have been signaling that for decades, yet no action indicates that people around the world still trust the US and hence USD more than any other currency.
- TradingPlaces 3y agoWhat do you do if you are the #3 ratings agency, and your ratings never make headlines?
- netfortius 3y agoMoney loss for investors [1] [1] https://finance.yahoo.com/news/stock-futures-slide-after-fitch-downgrades-us-debt-120602922.html https://finance.yahoo.com/news/stock-futures-slide-after-fit...
- wtf_is_up 3y agoZoom out. The Market has had a great year. S&P500 "sliding" 0.5% overnight is literally nothing.
- rjzzleep 3y agoIt's a US company. It doesn't really matter for the US. If it was any middle eastern or African country the downgrade would have put their currency into freefall and the country into hyperinflation. There are dozens of recent examples for that.
- seapoe 3y agoWhat are they comparing it to? Bitcoin standard I thought everything is compared to risk free rate which is the US treasury bill. I guess not so risk free anymore.
- bonzini 3y agoSwitzerland would like to have a talk on who's more risk free...
- 0xDEF 3y agoUS national debt per capita is on par with plenty of other developed countries. Why has it become such a big talking point in the US? National spending per capita is higher here in Denmark but we actually tax our wealthiest 10% so we have a lower debt per capita than many other developed countries.
- jwestbury 3y ago> Why has it become such a big talking point in the US? Because one of the two dominant political parties has adopted a strategy for the past several decades of trying to cripple governmental programs by reducing their income or otherwise increasing their outflows (see: USPS), and the national debt is a convenient scapegoat for them to make their point about "see, we're spending too much!"
- wongarsu 3y agoIn the US congress sets a budget that the executive (represented by the president) has to spend, and at the same time puts a limit on the amount of debt they are allowed to take out to spend that money. Somehow they always end up requiring more spending than what's covered by income and allowed debt, just so they can have a regularly scheduled fight to get some concessions in return for graciously allowing the country to pay their bills and continue employing people. It's a somewhat unique disfunction, and few countries in the world would survive these kinds of games.
- matsemann 3y ago> to AA+ from AAA Btw, what's up with the scale? Wasn't A good enough at some point, and they made A+, then later AA etc.? What would happen if someone decided AAA+ is the new best and all the AAAs are now not at the top anymore?
- xbmcuser 3y agoNo matter what excuses people make this is the direct result of politicians playing with the debt ceiling with the will they or won't they crap.
- expertentipp 3y agoIf it continues I'll buy with discount an aircraft carrier with entire personnel.
- datavirtue 3y agoLook at this little beauty right here. Nuclear powered!
- slashdev 3y agoI think this has less to do with the constant debt ceiling hostage negotiations, since that has been going on for decades. I think this has more to do with the US spending itself into debt in an unsustainable way. Up to $32T now. The interest carrying cost of that debt is soon going to surpass the entire defence budget. With no end in sight. It doesn't take an expert to see that's not fiscally responsible. While nobody seriously thinks the US will default anytime in the near future, they're obviously going to have to keep rates low and have the Fed buy bonds with "printed" money, inflating their way out of it. There's no free lunch. Future economic prospects for the US have never been so grim in living memory, and that's not some doomsday fear-mongering, that's just basic economic theory and math. It's well known that high debt levels weigh on future economic growth. At the end of the day it has to be paid, either by raising prices of everything (inflation) or raising taxes. Both are incredibly destructive to the economy. https://realinvestmentadvice.com/deficits-debt-and-why-32-trillion-matters/ https://realinvestmentadvice.com/deficits-debt-and-why-32-tr...
- gmerc 3y agoIt’s not solvable. Because even if you make great progress; someone like a criminal president comes along and spends it all on favors. True story.
- Perceval 3y agoThe President does not have power of the purse. The House proposes a budget. The President can't spend beyond what Congress approves, and can't really decline to spend anything that Congress has approved (i.e. "impoundment").
- gmerc 3y agoThat’s where theory and practice diverge Right right because the Republican party ever even once denied Trump what he wanted before 6/01
- koolba 3y ago> Because even if you make great progress; someone like a criminal president comes along and spends it all on favors. That’s always a possibility, but as we’ve seen with the recent attempt to spend $500B to pay off student loans, the SCOTUS does a decent job of stopping the truly egregious.
- westcort 3y agoPlay stupid games, win stupid prizes
- JohnClark1337 3y ago[dead]
- archo 3y agohttps://archive.is/pMI7D https://archive.is/pMI7D