U.S. Ratings Downgrade by Fitch

[twoplanekid]

August 2, 2023

I received the follow email because of my position on the Investment Advisory committee in the Villages.

"Fitch Ratings (Fitch) downgraded its long-term ratings on the United States of America late yesterday, following through on the Ratings Watch Negative assigned on May 25.


In its press release, Fitch cited an expected fiscal deterioration over the next three years, the high and increasing government debt burden, and an erosion in governance standards relative to its “AAA”-rated peers over the last 20 years that has resulted in recurring debt limit standoffs and last-minute resolutions. Fitch also noted the complex federal budgeting process and the government’s lack of a medium-term fiscal framework.


We continue to closely monitor this developing situation and its market impact. Should you have any questions, please reach out to your PFMAM client service professional."

[RPDaly]

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[Babubhat]

Buffett says non event. Trust him more than a ratings agency

[CoachKandSportsguy]

The USA doesn't deserve the top rating, as compared to the other countries with the top rating. The disclosure is just another legal requirement of information disclosure.

However, most domestic investment fund requirements don't have any rating requirements for the US govt debt. Its considered an asset class by itself. . . source: bloomberg guests and interviewees

BUT this rating is significant for non domestic investors investing around the globe.

But Fitch is NOT WRONG. . . and the US can get into an issue if they continue at the rate they are going. .

[manaboutown]

Why am I not surprised?

[Caymus]

The USA doesn't deserve the top rating, as compared to the other countries with the top rating. The disclosure is just another legal requirement of information disclosure.

However, most domestic investment fund requirements don't have any rating requirements for the US govt debt. Its considered an asset class by itself. . . source: bloomberg guests and interviewees

BUT this rating is significant for non domestic investors investing around the globe.

But Fitch is NOT WRONG. . . and the US can get into an issue if they continue at the rate they are going. .

"if"? Which century will they cut useless spending?

[jimbomaybe]

"if"? Which century will they cut useless spending?

People have the government they deserve

[CoachKandSportsguy]

"if"? Which century will they cut useless spending?

# 1 spending is Social Security
#2 is medicare. . .

but its not the spending, its the funding from payrolls which need to be increased.
you can't expect a rate from the 70s with an average life expectancy much lass than today, to pay benefits for the increase in the life expectancy of today. .

There are many spending and funding ways to keep these and to reduce fraud but it doesn't garner votes amongst the large working class population

so good luck to us!

[Caymus]

# 1 spending is Social Security
#2 is medicare. . .

but its not the spending, its the funding from payrolls which need to be increased.
you can't expect a rate from the 70s with an average life expectancy much lass than today, to pay benefits for the increase in the life expectancy of today. .

There are many spending and funding ways to keep these and to reduce fraud but it doesn't garner votes amongst the large working class population

so good luck to us!

At the moment, aren't those running surpluses including the trust fund? The deficit spending and negative credit rating is from other outlays.

[Blueblaze]

It's scary, but consider this -- every thing you own is tied to that rating. If US bonds ever became worthless, everything you have that you can't barter would also become worthless. So what's the point? The government's rating can never be less than "AAA" compared to every other investment, regardless of how close to the edge we dangle.

So what are you going to do? Invest in English bonds? How does that help, unless you're in England with your English bonds? Because if they're held in a US brokerage when it goes under, along with the SIPC, you're never going to be able redeem them!

I'm glad that somebody occasionally calls "BS" on the FED that seems to be determined to finance our destruction with fake money, but they downgraded Treasuries a few years ago, when the national debt was a fraction of what it is today. Did it fix anything?

[Caymus]

It's scary, but consider this -- every thing you own is tied to that rating. If US bonds ever became worthless, everything you have that you can't barter would also become worthless.

Look on the bright side. If the government defaults on their bonds, you could place a lien on assets. If you "lose" enough, you could own something like the Whitehouse or Grand Canyon:):)

[Blueblaze]

Look on the bright side. If the government defaults on their bonds, you could place a lien on assets. If you "lose" enough, you could own something like the Whitehouse or Grand Canyon:):)

Actually, we all supposedly already own both of those things, but you've perfectly captured the absurdity of the situation:

I have a brokerage account where the bulk of my life savings is in the form of imaginary money, backed by nothing more than the belief that somebody will accept it someday, which is loaned to my bankrupt government that printed it for a return less than the rate that the same government is printing new imaginary money, and yet that loan is rated to be the safest investment in the wealthiest country in the world -- but slightly less safe than it was yesterday.

[MandoMan]

August 2, 2023

I received the follow email because of my position on the Investment Advisory committee in the Villages.

"Fitch Ratings (Fitch) downgraded its long-term ratings on the United States of America late yesterday, following through on the Ratings Watch Negative assigned on May 25.


In its press release, Fitch cited an expected fiscal deterioration over the next three years, the high and increasing government debt burden, and an erosion in governance standards relative to its “AAA”-rated peers over the last 20 years that has resulted in recurring debt limit standoffs and last-minute resolutions. Fitch also noted the complex federal budgeting process and the government’s lack of a medium-term fiscal framework.


We continue to closely monitor this developing situation and its market impact. Should you have any questions, please reach out to your PFMAM client service professional."

Your source reporting on Fitch seems to have left out something important, or perhaps you did. In his daily business report last Thursday, Andrew Ross Sorkin wrote, “ Richard Francis, Fitch’s primary U.S. analyst, told The Times that a key factor behind the downgrade was America’s intense partisanship, which had led to standoffs on the debt ceiling and forestalls any efforts to reach agreement on taxes or on increasing federal spending. “There is no willingness on any side to really tackle the underlying challenges,” Francis said.”

What scared Fitch was the willingness of members of Congress to refuse to raise the debt limit so the country could pay for debts legally incurred. Their brinksmanship had most of the world-wide business community on edge and had serious effects on the market. This is Fitch’s way of telling Congress to stop doing it and do the right thing, well in advance of when payments are due. Are members of the House proud of doing this? They are costing investors more money than they may possibly have saved with their disgusting tricks.

[CoachKandSportsguy]

At the moment, aren't those running surpluses including the trust fund? The deficit spending and negative credit rating is from other outlays.

One of the main concerns from Fitch is the deficit governance.
Meaning that the funding of 100%(+) to GDP with the debt ceiling requirements in Congress gets to be political brinkmanship more often than not.

I believe that the entire debt which funds all the different parts of the government,
ie, the administration as well as the outlays, is all lumped together into a single evaluation point. Personally, my opinion is that the original debt raise increase from about $700 B which then was increased to about 50% more to $1T by the Treasury, put Fitch over the edge on the downgrade which they had been working on for months.

The US is getting too big to manage effectively, as well as there have been some very dumb (imho) decisions by the Supreme Court and Congress. .

[Andyb]

No, we are already there.

[Caymus]

One of the main concerns from Fitch is the deficit governance.
Meaning that the funding of 100%(+) to GDP with the debt ceiling requirements in Congress gets to be political brinkmanship more often than not.

I believe that the entire debt which funds all the different parts of the government,
ie, the administration as well as the outlays, is all lumped together into a single evaluation point. Personally, my opinion is that the original debt raise increase from about $700 B which then was increased to about 50% more to $1T by the Treasury, put Fitch over the edge on the downgrade which they had been working on for months.

The US is getting too big to manage effectively, as well as there have been some very dumb (imho) decisions by the Supreme Court and Congress. .

I may have missed it. Which recent Supreme Court decisions led to increased (deficit) spending?

[airstreamingypsy]

Fitch's downgrade has little to do with America's ability to pay their debt and everything to do with the shameful display of brinksmanship every time the debt ceiling is debated. I think it's a good thing to show these clowns that constantly bringing the country to the brink of collapse has consequences

[Vermilion Villager]

August 2, 2023

I received the follow email because of my position on the Investment Advisory committee in the Villages.

"Fitch Ratings (Fitch) downgraded its long-term ratings on the United States of America late yesterday, following through on the Ratings Watch Negative assigned on May 25.


In its press release, Fitch cited an expected fiscal deterioration over the next three years, the high and increasing government debt burden, and an erosion in governance standards relative to its “AAA”-rated peers over the last 20 years that has resulted in recurring debt limit standoffs and last-minute resolutions. Fitch also noted the complex federal budgeting process and the government’s lack of a medium-term fiscal framework.


We continue to closely monitor this developing situation and its market impact. Should you have any questions, please reach out to your PFMAM client service professional."
The old Saturday morning "Let's do a political post and not make it look like a political post...post" Yawn........:mornincoffee:

[Babubhat]

This is on par with saying the Sun will explode. Bigger things to worry about

[Cheapbas]

Fitch's downgrade has little to do with America's ability to pay their debt and everything to do with the shameful display of brinksmanship every time the debt ceiling is debated. I think it's a good thing to show these clowns that constantly bringing the country to the brink of collapse has consequences

Yep, absolutely THIS! Not to mention the insurrection of January 6th was specifically mentioned by a senior director.

[bumpa]

"if"? Which century will they cut useless spending?

Define Useless? Your Medicare? Military? Debt Interest?

What is the breakdown of the US federal budget?
The federal government spent $6.5 trillion in FY 2022 — or $19,434 per person — including funds distributed to states. Medicare, Social Security, defense and veterans, transfers to states, and aid such as SNAP and refundable tax credits were the biggest categories, accounting for 75% of spending.

[RUCdaze]

RPDaly, et al: We are not 'approaching' banana republic status; now we ARE a banana republic.

[Vermilion Villager]

RPDaly, et al: We are not 'approaching' banana republic status; now we ARE a banana republic.

Banana Republic of America. Est. Jan. 2017