Fitch downgraded the US credit rating from “AAA” to “AA+”

Spread the love

❗️Fitch downgraded the US credit rating from “AAA” to “AA+”.
Rationale: the rapid growth of the national debt and budget deficit, a record increase in the Fed rate, an increase in the risk of a crisis in the US economy.

👆All the reasons given by Fitch are reasonable and objective. The inertia of growth is still maintained, so the US economy looks better than it really is. But the longer the rate stays at such a high restrictive level, the more problems in the US economy will increase. Now the rating agencies have begun to notice this.

The main difficulty of this whole situation is that it is unclear how to get out of it:

  • Yes, the rapid growth of the national debt…but if it is not increased, then how to cover the budget deficit.
  • Yes, the budget deficit…but if you remove the deficit, then social and political problems will begin.
  • Fed rate hike. But if you do not raise it, then confidence in the dollar is lost due to high inflation.
  • The risk of a crisis in the economy. But a moderate crisis is needed to reduce demand. Otherwise, how to reduce inflation?
See also  When Little Pent-Up Demand Is Left

In general, the United States is in a tangle of problems connected with each other. And the only answer of the authorities is – let’s collect more debt and use it to close the holes in the budget. This method will not work forever. Hence the downgrade of the US.

How did the downgrade affect the markets? A slight rise in the VIX and a drop in the indices


Leave a Comment

Don`t copy text!