Downgrade

In case you were snoozing a couple of weeks ago, Fitch Ratings downgraded the country's long-term AAA credit rating citing the steady deterioration in standards of governance over the last twenty years as the reason for Fitch's lack of confidence in our fiscal management.

Hat's-off to the performative politics crowd who increasingly delight in tearing stuff down and burning it up.  The downgrade was likely met with no shortage of fist-bumping by those morons. 

The downgrade, the second in history, is unlikely to curb the global appetite for Treasury securities; nevertheless, it is evidence that the financial community has concerns about the political brinkmanship that seems to have possessed certain corners of Washington including the very recent averting of a debt ceiling crisis and default.  

The first downgrade to our credit rating occurred in 2011 when S&P dinged our bond rating in the midst of an earlier bout of self-inflicted debt ceiling brinkmanship.

Between you and me, Social Security, Medicare and Medicaid constitute the 800 pound gorilla in the room.  And I suspect Fitch is paying attention to the lack of action on reform of these demographic time bombs. The Big Three now constitute more than one-half of our entire annual federal budget.  Regrettably,  among some groups in Washington the solution to this problem is an unnatural preoccupation with someone else's gender dysphoria.  Am I the only one that considers this creepy and a distraction from more serious matters?  I digress.

In any event, inflation has been slowly retreating, corporate profits are up and the economy seems strong enough that we'll dodge a recession. Inasmuch as I had to give-up my crystal ball at retirement only time will tell.

Meanwhile, If you're forced to only purchasing AAA-rated securities you've one less choice to pick-from and we'll have to wait for the impact on our long term borrowing costs until the Fed holds its next rate-setting meeting.  

There are plenty of other nations that shared AAA bond ratings in 2011 that have since been downgraded by one of more of the rating agencies.  This would include peers such as Canada, France and the UK.  While we remain one of the most influential of countries as a consequence of the size, strength and depth of our economy; the economic condition is only one contributor to a rating qualification.  Bottom-line, the likelihood that a nation's bondholders will be paid on time, in full and unconditionally remains paramount.  A strong economy is a contributor, but dysfunctional fiscal governance can outweigh that strength.  The remaining AAA-rated nations have better track records that us when it comes to fiscal governance.

Alas, the performative politics crowd, who increasingly delight in tearing stuff down and burning it up, have gleefully announced their intention to press forward with more debt limit shenanigans and a government shutdown this fall.  Morons.

Performative politics has real world consequences to our county's reputation, fiscal and economic health and the same for the life savings of the rest of us.

If you take delight in this bullshit you need to get your head on straight.