Will Fitch Rating withdraw their AAA in the United States? After that of 1971, are we heading towards the second fault of Uncle Sam?
AA
Fitch Ratings placed the United States on Wednesday on negative watch, suggesting that a downgrade could occur in the coming months.
It is more precisely the component “Long-Term Foreign-Currency Issuer Default Rating”currently rated AAA, which may be downgraded two notches to AA.
The New York rating agency justifies itself by pointing to the intensification of political partisanship that prevents raising the debt ceiling when the cut-off date is imminent.
Fitch believes it is more likely that the debt ceiling will be raised in time. However, the risk exists, “which would mean that the US government could start to default on some bonds.”
The United States reached its debt limit of $31.4 trillion on January 19, 2023. The Treasury has put in place some accounting tricks, but there will be no recourse from June 1, 2023.
The second Chinese rating agency was not so patient. China Chengxin International Credit Rating a unsheathed this Friday by downgrading the United States from AAA to AA+.
Debt = Inflation
Fitch notes that US public debt stood at 112.5% of GDP at the end of 2022. Much more than “the median of 36% of AAA countries”, can we read. Another concern is the increase in debt service:
“Interest rates have risen significantly over the past year. The 10-year rate is around 3.7% (compared to 2.8% a year ago). »
And despite these high rates, the CBO (Congressional Budget Office) sees the budget deficit reaching $2.7 trillion in 2033 (compared to $1.4 trillion in 2022). That is to say a deficit equivalent to the GDP of France…
Beyond the scarecrow of debt default, remember that a public debt cannot be repaid. The debts will be paid with new debts (which the Fed will buy). That or a default, it amounts to the same thing: more inflation.
And as always, it is those who own the shares of multinationals, prestigious real estate, master paintings or collector cars who will benefit from inflation. So many things to which small purses obviously do not have access.
Conversely, bitcoin, which is the best store of value that humanity has known, can be obtained from 10 euros. Saving in bitcoins is crucial for fair protection against the looming hyperinflation.
If you haven’t read it yet, we recommend reading our article: Why so much debt?
Receive a digest of news in the world of cryptocurrencies by subscribing to our new service of daily and weekly so you don’t miss any of the essential Tremplin.io!
