this post was submitted on 02 Aug 2023
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News

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98
Fitch downgrades US credit rating, citing mounting debt and political divisions (apnews.com)
submitted 1 year ago by MicroWave@lemmy.world to c/news@lemmy.world
8 comments fedilink hide all child comments
 

The rating was cut Tuesday one notch to AA+ from AAA, the highest possible rating. The new rating is still well into investment grade.

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[–] MicroWave@lemmy.world 23 points 1 year ago

It’s only the second time in the nation’s history that its credit rating has been cut. In 2011, the ratings agency Standard & Poor’s stripped the U.S. of its prize AAA rating after a prolonged fight over the government’s borrowing limit. The Government Accountability Office, in a 2012 report, estimated that the 2011 budget standoff raised Treasury’s borrowing costs by $1.3 billion that year.

At the same time, the huge size of the U.S. economy and historic stability of the federal government has kept its borrowing costs low. Global investors often flock to U.S. Treasury securities during periods of economic turmoil, lowering the interest rate paid by the U.S. government.

[–] GiddyGap@lemmy.world 21 points 1 year ago

Embarrassing, but fully deserved. Thanks, Kevin.

[–] autotldr@lemmings.world 11 points 1 year ago

This is the best summary I could come up with:

The Government Accountability Office, in a 2012 report, estimated that the 2011 budget standoff raised Treasury’s borrowing costs by .3 billion that year.

Global investors often flock to U.S. Treasury securities during periods of economic turmoil, lowering the interest rate paid by the U.S. government.

It said U.S. governance has declined relative to other highly rated countries and it noted “repeated debt limit standoffs and last-minute resolutions.”

Fitch produced a report last year that showed government stability declined from 2018 to 2021, but increased since Biden assumed the presidency, said the person, who was granted anonymity to disclose private conversations.

Economists at the Federal Reserve made a similar forecast this spring but then reversed it in July and said growth would slow but a recession would likely be avoided.

[–] afraid_of_zombies@lemmy.world -1 points 1 year ago (1 children)

I am downgrading Fitch citing that they suck

[–] UFO64@lemmy.world 3 points 1 year ago

The debt has become a political bargaining chip in the US. I’m amazed we are rated as high as we are…

[–] johnefrancis@lemmy.ca -2 points 1 year ago (2 children)

Having a credit rating on the imaginary debt of the US is ridiculous.

The federal govt doesn't borrow US dollars - it creates US dollars.

It's impossible to default.

[–] chuckleslord@ttrpg.network 11 points 1 year ago

It's not impossible to default. It should be, but it isn't due to "debt ceiling" nonsense. Political instability is the cited reason for the downgrade and, yeah, makes perfect sense why that would be.