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HomeDebt FreeFitch Drops US Credit Rating to AA+. Does That Weaken The Dollar?

Fitch Drops US Credit Rating to AA+. Does That Weaken The Dollar?



On Tuesday, Fitch, one of the three major United States credit rating entities, downgraded the U.S. rating from AAA to AA+ over what it calls “the steady deterioration in standards of governance” and “debt ceiling battle and brinkmanship.”

Unlike the Standard and Poor’s and Moody’s Investor Service, Fitch called out the U.S. Government and said they based their decision on “the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance.” 

Immediate Push Back

Even though Fitch assigned a “stable outlook” to their rating downgrade, the decision received instantaneous pushback from the White House and Treasury Secretary Janet Yellen.

Yellen argued, “Treasury securities remain the world’s preeminent safe and liquid asset, and that the American economy is fundamentally strong.”

Mickey Levy of Berenberg Capital Markets also added, “There is a clear short-run implication of the downgrade involving higher bond yields and a potential sell-off in the stock market and the dollar.” Still, he does not expect any long-term consequences noting the immense awareness of the rising debt issue. 

Social Impact

Increasing Social Security and Medicare costs caused a showdown between staunch right Republicans and their Democratic counterparts over Democrat-favored spending programs. 

The last-minute save from a bipartisan agreement between Senate Majority Leader Kevin McCarthy and The White House avoided a default. They raised the debt ceiling just in time to keep the federally funded program operating. 

For Fitch, though, that is part of the problem as they cite eroded confidence in fiscal management as a factor in their decision. “The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management.”

Citizen Response

While the White House and Treasury Secretary Yellen feel this is just a “bump in the road,” so to speak, the average American isn’t so sure. Several people voiced their opinions and concerns on social media over the downgrade. 

One user doesn’t have much confidence in the upcoming election. 

Apparently, Warren Buffett isn’t worried.

Someone thinks the public will be the ones to suffer.

Several commenters feel Republicans are to blame.

Both Sides

While politicians on both sides of the aisle will continue to blame each other for the financial status of the United States, Republicans and Democrats will need to work together for the good of the people. As Congress and The White House continue to address the economy, there’s no doubt compromises between the parties will need to be made. 

Source: Twitter, Barrons.




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