Fitch Threatens US with Downgrade

Did it forget how the US government hounded Standard & Poor’s?

Bitter irony! Just yesterday, I had a conversation with Bill Tilles, and we agreed on all three points. This morning, we’re already proven wrong on one of them:

  1. A government shutdown as Congress fails to pass spending levels for fiscal 2018? Yes, it could happen.
  2. A failure to raise the debt ceiling, thus pushing the US government into default, or “selective default?” Very unlikely. Lawmakers are political animals that use charades and posturing to accomplish their goals, but they’re not stupid (we hope).
  3. A threat by US ratings agencies to slash the US credit rating due to the debt-ceiling charade and the consequences of a “selective default?” No way, we agreed. Ratings agencies learned their lesson from how the US government hounded Standard & Poor’s after its 2011 downgrade of the US.

A new day, and we’re already wrong. Standard & Poor’s may have learned its lesson. But Fitch Ratings hasn’t – though its language this morning was a lot kinder and gentler (emphasis added).

If the debt limit is not raised in a timely manner prior to the so-called “x date,” Fitch would review the US sovereign rating, with potentially negative implications. We have previously said that prioritizing debt service payments over other obligations if the limit is not raised – if legally and technically feasible – may not be compatible with ‘AAA’ status.

In the most recent letter to Congress, Treasury Secretary Steven Mnuchin said that the US would run out of money by the end of September. This can likely be stretched into October. Just this week, Senate Majority Leader Mitch McConnell swore there was “zero chance” that “we won’t raise the debt ceiling.”

But Fitch adds that Congressional posturing alone could cause a downgrade – the same reason S&P downgraded the US during the debt ceiling fight in 2011. Fitch:

Brinkmanship over the debt limit could ultimately have rating consequences, as failure to raise it would jeopardize the Treasury’s ability to meet debt service and other obligations.

The next Congressional session begins on 5 September, with only 12 congressional working days before month-end. We believe there is strong political will to ensure that Treasury securities are honored in full and on time….




So if push comes to shove, debt payments would be prioritized, and the US wouldn’t default on its bonds, Fitch “believes.” But defaulting on other obligations also has consequences:

In Fitch’s view, the economic impact of stopping other spending to prioritize debt repayment, and potential damage to investor confidence in the full faith and credit of the US, which enables its ‘AAA’ rating to tolerate such high public debt, would be negative for US sovereign creditworthiness.

And even if the debt ceiling is raised in time, or suspended, “considerable uncertainty remains around the short-term fiscal and borrowing outlook,” Fitch said. So more clouds hanging over the US credit rating.

Back in September 2013, as the US was starting to run out of money while Congress was brilliantly posturing, Standard & Poor’s, which had already downgraded the US to AA+ in 2011, warned that without a debt-ceiling hike before the out-of-money date in October, it would cut the US to “selective default.”

A “selective default” indicates that the issuer “had failed to meet one or more of its outstanding debt obligations,” it said. The US might continue to make interest payments on its bonds, but might not pay other obligations. And typically, a selective default ends up knocking credit ratings to “between CCC and B,” it said. In other words, S&P had threatened to cut the US credit rating to junk.

Fitch wisely didn’t used the term “selective default.” It refers to “prioritization” and “prioritizing” debt payments, while not paying other obligations – so the same type of “selective default” S&P had been warning about.

But Fitch used the same term that S&P had used to lambaste the political posturing around the debt ceiling: “Brinkmanship.”

The Department of Justice sued S&P in February 2013 over its role in the mortgage crisis. S&P claimed it had been singled out in retaliation for the 2011 downgrade. Its September 2013 threat to cut the US to junk didn’t help matters. In 2015, S&P settled with the DOJ for $1.5 billion. No US credit agency would do that ever again. That was the consensus. And this morning, Fitch broke the consensus.

So what will happen when Congress finally raises the debt ceiling (the other option is too ugly to even imagine)? Read… US Gross National Debt to Spike by $800 Billion in October?




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  59 comments for “Fitch Threatens US with Downgrade

  1. Begbie
    Aug 23, 2017 at 12:55 pm

    Trump was adamantly opposed to debt ceiling increase when Obama was president. I believe that Obama was opposed to debt ceiling increases when Bush was president. Kick the can

    • Keith
      Aug 23, 2017 at 8:20 pm

      Candidates talk about responsibility and the reforms we need; once elected, they realize it is way easier to go with the flow and hope someone else gets caught in the cookie jar.

      • Mike
        Aug 27, 2017 at 4:00 am

        The military industrial complex and it’s subsidiary, the surveillance agencies, will not accept any spending cuts. Given the redistribution of wealth due to the avoidance of taxes for companies that choose not to formally return profits to the U.S. and free money given to banksters through ultra low interest rates charged to them on trillions and QE commissions, cuts in social spending when Americans are suffering would not be fair or accepted.

        They need something to make Americans accept the giving of trillions over years to them. They need a viable enemy to scare us with.

        The Islamic terrorists are moribund. Despite this, and the fact that a war with China or Russia could lead to the end of humanity, we still are spending on more aircraft carriers and other weapons that our realistic enemies (like North Korea) cannot realistically match, by far.

        While I would want a strong military if China started to invade other countries, etc., I do not see an imminent threat that the billions we spend in carriers (or other weapons) will mitigate. They are just big, fat juicy targets for nation’s with adequate technology (ICBMs/missiles) and will soon be as antiquated as a seaplane, except against smaller countries, like North Koreas.

        If we attack them they will kill millions of innocent children, women and men, and we will kill similar numbers trying to stop them. Our government is spending wastefully while refusing to raise taxes on the 11% richest Americans, who control more than 76% of US wealth.

        However, while Fitch is saying things that an honest rating agency would say, we must remember it’s past behavior. I hope that they are truly reformed and have given an accurate and well motivated rating threat.

        We are heading for a cliff if the spending limit is not raised or the banksters begin another QE or maybe, attempt to unwind it.

        Fitch is doing its job in issuing warnings and risking retaliation.

  2. Dean
    Aug 23, 2017 at 12:57 pm

    Everyone knows it will be raised. The surprise may be the amount that is added. The new ceiling may make Obama look thrifty.

  3. mvojy
    Aug 23, 2017 at 1:02 pm

    Let’s ignore Fitch and go with what Abercrombie says

    • IdahoPotato
      Aug 23, 2017 at 6:20 pm

      :-))

  4. George McDuffee
    Aug 23, 2017 at 1:12 pm

    When you play with fire, expect to get burned.

    An operating budget, and by extension an increase in the debt limit, are expected tasks of a functional Congress. “Continuing Resolutions” are open invitations to bureaucratic bloat and over-reach.

    Some quick question to the group: Why do we retain the “Kabuki” theater of the debt limit? Should we just abolish the national debt limit as it accomplishes nothing? What sort of penalty should Congress and their staffers face for the failure to enact a operational and meaningful budget in a timely manner? Should. other than military. departments/agencies have biannual budgets?

    • Kent
      Aug 23, 2017 at 1:43 pm

      1. Why do we retain the “Kabuki” theater of the debt limit?

      As one last effort to hold down federal spending. The USA’s core myth is that all wealth comes from private effort, and that all government actions interfere with that wealth creation. Therefore, government must be constrained. Who wants to vote to raise more debt?

      2. Should we just abolish the national debt limit as it accomplishes nothing?

      Well, it helps to maintain the myth. That’s something. Do we really want to go back to the days of the CCC and WPA?

      3. “What sort of penalty should Congress and their staffers face for the failure to enact a operational and meaningful budget in a timely manner?”

      How about a simple constitutional amendment that states “Should the House of Representatives fail to enact an operational and meaning budget in a timely manner, then all sitting members shall be denied the right to hold further elected office, upon the conclusion of the existing term.”

      4. Should. other than military. departments/agencies have biannual budgets?

      Wouldn’t hurt. Of course, re: the military, the Constitution already says this:

      Section 8.12 “To raise and support Armies, but no Appropriation of Money to that Use shall be for a longer Term than two Years;”

      • TJ Martin
        Aug 23, 2017 at 2:01 pm

        Actually Kent in response to question #2 ? In all honesty in light of the multitudes of benefits that were garnered by the CCC and the WPA including laying down the foundations and infrastructure that had collapsed under the Great Depression we so desperately needed once WWII came into being ?

        Yeah I really would like to see us go back to the days of the CCC and WPA .. putting all those coal miners etc. back to work rebuilding our rapidly decaying and crumbling infrastructure etc etc – et al complete with all the regulations and restrictions that came with the jobs that the WPA and CCC helped re-establish and create mandating responsible behavior from those benefitting from the programs : which went a long way to establishing the discipline that was later needed once we entered into WWII

        • nick kelly
          Aug 24, 2017 at 11:50 am

          Why would you put coal miners back to work when you’re awash in cheap clean natural gas?

      • Robert
        Aug 23, 2017 at 2:33 pm

        Points well taken. Some people act as if there were no everyday consequences to relentless hikes in the national debt. On August 17, Mitch McConnell nonchalantly acted as if it were a matter of fulfilling honorable expectations* (now if he watched his butcher look him in the eye and say “There is no way I’m not going to give you a pound of beef” and then observe him injecting water into it first, he might not act so cavalier- we are talking about devaluation: inflation.
        Not to mention the fact that it was debt that caused everyone, rich and poor, in the Weimar Republic,one day in 1923, to find themselves in the top income tax bracket, because suddenly they were all billionaires. President Trump has been bragging how bad could things be- the markets just hit new highs a week ago (Clue: the Caracas stock exchange has been doing likewise, and on a % basis outstripping all others.)
        * “There is zero chance-no chance-we will not raise the debt ceiling that we won’t increase the debt ceiling. The credit of the United States will be upheld. America is not going to default.”

        • Robert
          Aug 23, 2017 at 2:36 pm

          I meant to add: Both Present Treasury Secretary Mnuchin and his prdecessor Jack Lew are on record as favoring national debt hikes with no Congressional vote input. How’s that for “full faith and credit”?

      • JB
        Aug 23, 2017 at 3:25 pm

        i agree . The debt ceiling law is an old one . Any debt increase to the national debt level should be authorized/approved when the budget process is completed not after the liability has been incurred.

        • Wilbur58
          Aug 23, 2017 at 10:55 pm

          Agreed, JB. It’s so pathetic. If a budget is approved by vote, it should be assumed that the expenses there within are also approved.

  5. Mike
    Aug 23, 2017 at 1:49 pm

    If we are at war, won’t debt ceiling be tossed aside?

  6. TJ Martin
    Aug 23, 2017 at 1:50 pm

    Well Wolf .. y’all missed out on a significant factor revealed today that may contribute to both a temporary government shut down as well as not increasing the debt ceiling .

    That being … pardon the moment of politics … that Trump is now calling for a government shut down and refusing to raise the debt ceiling if congress does not approve the $1.8 billion dollars for his precious and pretentious 18th century technology wall for a very 21st century problem .

    Thats one serious game of ‘ Chicken ‘ Trump is trying to play with both the Democrats and the moderate Republicans .. and one that very well might bite him right on the posterior … hard in the end . And from the looks of things ( 12:48 MST ) Wall Street is already reacting negatively to his threats

    • Mary
      Aug 23, 2017 at 3:42 pm

      Yes, I thought this post was inspired by Trump’s threats on Tuesday re his wall. Added to that, we are seeing a man who seems less and less connected to any reality other than his monumental hurt feelings.

    • Wilbur58
      Aug 23, 2017 at 10:58 pm

      TJ,

      Isn’t it far more than $1.8 billion just to get enough concrete on site, let alone the labor?

      You know, people thought Palin was a new low. I always remind them of the great Dan Quayle. But Trump’s wall is pretty far down there.

      • fajensen
        Aug 24, 2017 at 3:52 am

        The 1.8 B is just what The Donald think he will get away with. Once Boeing, Thales, BAE Systems, Xie and whatever gets to add full-spectrum surveillance to the package, we will be at triple that, easy.

        • Pete
          Aug 24, 2017 at 8:26 am

          $1.8 billion per mile more likely !

  7. polecat
    Aug 23, 2017 at 2:02 pm

    So will Fi(l)tch have their collective peepee slapped by the feds, as was Egan Jones for THEIR U.S. ratings downgrade not so very long ago ?? … or is their pedestal just too high to reach ?

  8. Truth Always
    Aug 23, 2017 at 2:44 pm

    Why even have a debt limit?

    America can print all the dollars it wants and the rest of the world buys up US Treasury bonds.

    With electronics we don’t even need to buy paper or ink. Just add an extra 0 or two to the right….

    Someone please help me understand why what I suggest is not the truth even though that is happening.

  9. OutLookingIn
    Aug 23, 2017 at 2:46 pm

    DEFAULT?

    Too late. The US has already defaulted.

    The default took place on August 15 1971 when Nixon closed the gold window and “temporarily” suspended the convertibility of the dollar into gold. Effectively killing the Bretton Woods monetary agreement. This temporary measure is now 46 years old!

    Up until August 15 1971 the US dollar was literally gold as gold. Since that time it’s as good as….? What? Give me a hamburger today for which I will gladly repay you Tuesday. Yup. And the checks in the mail.

  10. roger lagerfeldt
    Aug 23, 2017 at 2:57 pm

    of course they will raise it…question is how ?

    • TJ Martin
      Aug 23, 2017 at 3:39 pm

      How ? Thats easy .. for them at least remember first and foremost governments do not function like corporations nor do households live under the same rules of either . So how does they does it one asks .

      Simple … just move the bar / kick the can a little bit further down the road … and let the next generation worry about the consequences … not that there’ll be any mind you as they follow suit kicking the can down a little bit further .

      And someone else mentioned the grievous errors of the Weimer Republic ?

      Apples to Cats Eye marbles I’m afraid . That .. was when logic and a semblance of common sense if not ruled at least influenced governments and finance thereby opening the door to consequences … whereas this is now … where all common sense logic and reality have been put aside all but eliminating any and all potential consequences … until .. err .. it doesn’t .

      The genuine irony of the above paragraph being .. we’ve been down this road before .

    • Ambrose Bierce
      Aug 24, 2017 at 10:10 am

      https://www.stlouisfed.org/publications/central-banker/spring-2013/is-the-fed-monetizing-government-debt

      the process turns on the permanent/temporary status of the balance sheet, and the Fed has promised to normalize. Message from Fitch to the Fed, don’t draw down the balance sheet assets or there will be trouble. And to Congress, don’t cut (new) spending.
      It’s simple we have to have deficits today, so we can have debt tomorrow, which is money we have already spent, so we can pay for it by the process of monetization ( there is feasible way to pay for government spending with tax revenue, in real time. )

  11. jon
    Aug 23, 2017 at 3:21 pm

    Nothing would happen
    this is all dog and pony show…

  12. tony
    Aug 23, 2017 at 4:03 pm

    Just keep those social security checks coming, with that and the$8.00 a month i get from my gold and silver stocks i’m set.

  13. Doug
    Aug 23, 2017 at 4:27 pm

    I believe this has all been posturing to enact the repatriation tax holiday. Congress will “find” a temporary reprieve with this change. They will be “forced” to enact publicly unpopular legislation. I’ve expected this playbook for last 6 months.

  14. SLS Carrier
    Aug 23, 2017 at 6:14 pm

    If America cannot pay its bills without borrowing money, the we are truly a bankrupt nation and deserve to lose the right to the PetroDollar and the World’s reserve currency. We are a nation of imagined wealth…

  15. Gershon
    Aug 23, 2017 at 7:11 pm

    Everybody concerned will keep playing extend and pretend, since they know at the end of the day Yellen can hit Ctrl+P and print away all government and Wall Street debts and obligations. Of course, your monthly SS check might buy a can of beans afterwards, but hey, the oligarchs needed to cull the herd anyway.

    • Frederick
      Aug 25, 2017 at 1:44 am

      Start becoming self sufficient Grow a nice garden Get yourself a bunch of chickens Plant an avocado tree or two It can be done by many but sadly most are way too lazy and will suffer greatly because of inaction Alittle stash of precious metals in case the dollar gets clobbered wouldn’t be such a bad idea either Diversify into other currencies as well Remember the eggs in one basket expression and you will be fine

  16. Gershon
    Aug 23, 2017 at 7:18 pm

    Never forgot that Fitch, S&P, and Moodys all gave AAA ratings for toxic-waste mortgage-backed securities (MBSs) bundled as “investments” and sold to credulous bag holders, who later lost their shirts. These ratings agencies exist solely to give a veneer of legitimacy to Wall Street’s rackets, and should never be confused with honest, legitimate ratings agencies. That said, any honest ratings agency that took a hard look at the Keynesian counterfeiters and racketeers running the Fed and the profligate tax-and-spend Republicrat duopoly on Capital Hill would’ve downgraded the US to junk grade years ago.

    • Frederick
      Aug 25, 2017 at 1:46 am

      True VERY true They are not to be trusted any more than our Treasury secretary regarding Fort Knox and the gold reserves It’s all kabuki theatre for the drones The 5 percent that even care or are aware

  17. GSH
    Aug 23, 2017 at 7:33 pm

    We have the recurring debt ceiling charades because Congress loves them. It provides much needed opportunities to grand-stand, signal virtue and get bribed to vote. What is not to love?

  18. Chris
    Aug 23, 2017 at 9:03 pm

    By stating that he will shut down the government to get his wall, Trump has handed the democrats his own noose. They can easily block, or at least delay the debt ceiling increase long enough to cause quite a mess. Trump will have to either capitulate or resign.

    • Petunia
      Aug 24, 2017 at 8:43 am

      Not really, it’s a win-win for him either way. He will get whatever debt ceiling he wants, or, he will start firing the mostly democratic govt workers. I’ll bet he will start with the state dept. He’s got both sides in a corner.

      • Frederick
        Aug 25, 2017 at 1:49 am

        Petunia Firing federal workers sounds good to me Many are overpaid parasites sucking our blood anyway and could easily be replaced with tech I’m sure I say let er rip Mr Trump Even if it means not receiving my SS check I will be fine without it god forbid

  19. Julian
    Aug 23, 2017 at 9:24 pm

    The Debt Ceiling needs to get raised, but Trump must pay hardball with Congress over funding for the Wall.

    The Government must “Shut Down”, and it will.

    Trump should Shut it down until all his demands are met – if that means a 100 Days+ Shut Down and they’re not back until 2018 – so be it.

    On the back of the Shut Down Trump must find committed “Trump” Republicans – and for godsake man – properly vet them as such!

    Use litmus questions!! Geez.

    These Trump Republicans must for starters take out the likes of Swamp RINO Senators Jeff Flake (Arizona), Dean Heller (Nevada) & Bob Corker (Tennessee) – trio of Senate ‘Never Trumpers’ up for reelection in 2018.

    And then get to work on Trump Republicans to run against Democrat Senators who are in States Trump won (or at least halved) in 2016.

    I believe there are up to a dozen Democrat Senators in these vulnerable States Trump should target.

    If he plays his cards right Trump could really gain control of Congress in 2019 – but he must show his power and scare recalcitrant Republicans into line.

    The only way to do this is to target and get rid of Flake, Heller & Corker via primary challenges.

    • Frederick
      Aug 25, 2017 at 1:52 am

      Julian I couldn’t agree more but you left out the MOSt agregious RINO of all the lovely warmongering old fool Johnny “Wetstart” MCCain

  20. Realist
    Aug 23, 2017 at 11:35 pm

    Fitch isn’t it owned by Hearst and the French ? Dwindling US influence might have emboldened them.

  21. Gershon
    Aug 24, 2017 at 8:00 am

    While Yellen’s gifts of free trillions in gambling-money “stimulus” to her Wall Street patrons have goosed our Ponzi markets and asset bubbles to unsustainable highs, a vast and growing number of people in our oligarch-pillaged economy are living paycheck to paycheck and sinking deeper into debt with no hope in sight.

    https://www.cbsnews.com/news/americans-living-paycheck-to-paycheck/

    • Frederick
      Aug 25, 2017 at 1:54 am

      Gershon Exactly and hence all the “civil war” Talk People are angry and starting to lose it Perhaps that’s the plan(Removing silver foil hat now)

  22. Petedivine
    Aug 24, 2017 at 8:13 am

    Whether the budget / debt ceiling gets passed or not the U.S.’s increasing debt and waning influence are apparent for all to see. I was too young to understand the collapse of the Soviet Union, but I suspect there are important parallels between the Soviet debt based system and the current U.S. system. A printing press does not guarantee the future of the U.S. empire or the petrodollar. Maybe we are seeing the collapse right now. The fact that collapse is even a possibility is something to consider.

    • Robert
      Aug 24, 2017 at 2:04 pm

      Putin was seen lovingly handling a state bar of gold, as if to say “See, we no longer go with Lenin who said all it was good for was lining urinals,” but the truth is no government is willing to constrain spending through the use of a gold, or silver-backed currency. Central bankers are a clubby bunch, but how does CB A really know how much CB B is cranking out on his presses? (ghis was the basis for the gold (…any) standard. And when China saw that the Fed was making trllions in loans, virtually interest-free, in TARP and QE, to the very banks that owned it, they naturally followed suit. People like Mitch McConnel would have you believe that as long as they are handing you a piece of paper, they are “keeping faith.” What does that mean?

  23. Mike R.
    Aug 24, 2017 at 8:19 am

    In an earlier thread on the debt limit, I commented that this time may be different as there was an increased tendancy to “cut off my nose to spite my face” at play; particulalry and especially with Trump in office.

    Trump has been denied all of his campaign pledges so far. He may very well use the debt ceiling as a wedge to get something of his wall promise.

    Like most commenting here, it will resolve at some point; however, this go around may be far rougher until resolution, including shutdown of the government for a period of time. It has happened before with cooler players in power.

    • Realist
      Aug 24, 2017 at 11:40 am

      In some aspects Trump has been succesful, while media/dems/CONgress etc have been preoccupied with secondary issues, Trump has managed to appoint judges throughout the federal courts that will be influencing things for decades to come, just to maintain one example ….

      • Realist
        Aug 24, 2017 at 11:41 am

        Mention not mantain I hate these autocorrection features….

  24. Pete
    Aug 24, 2017 at 8:30 am

    Start stamping out those $1-Billion silver coins ! You betcha !
    Its a stupid system where Congress collects X dollars, spends 150% of X dollars, and then every president in sequence gets the blame.

    • Willy2
      Aug 24, 2017 at 12:36 pm

      – Issueing a $ 1 billion silver coin is called “Hyper-Inflation”.

  25. Willy2
    Aug 24, 2017 at 8:35 am

    – Credit Rating company Egon Jones also felt the wrath of the US government and it lackeys/minions in 2010 & 2011 when it downgraded the US government.

    http://www.foxbusiness.com/politics/2013/01/22/curious-case-sec-vs-egan-jones.html

    – In 2016 Trump said that he wouldn’t (fully) repay the US federal debt.
    https://www.forbes.com/sites/timworstall/2016/05/07/donald-trumps-glorious-threat-to-default-on-the-national-debt-is-just-the-conventional-wisdom

    Just imagine what a (strategic/partial) default would do to the US bond market(s) …………..
    – “Strategic default” ? You’ve go to be kidding !!!!

  26. Ambrose Bierce
    Aug 24, 2017 at 9:52 am

    Fitch is saying we have very little wiggle room, but the third way, a bipartisan papering over of the issue will have consequences as well. More partisan anger, and POTUS is trying to recapture some of his campaign rhetoric but then building a trillion dollar wall isn’t fiscally responsible. The response to Fitchs 2011 downgrade was MASSIVE amounts of QE. And for my money that’s where this is all heading, although the Fed and the other CBs are trying to normalize, it’s back to OZ.

  27. stan
    Aug 24, 2017 at 1:54 pm

    When they create the money they get to spend it. When the crash happens and the money “disappears “, it is in your pocket . Why should they care? Everything is going according to plan.

  28. raxadian
    Aug 25, 2017 at 11:52 pm

    War is a big business for weapon makers and soldiers of fortune, not to the country taxpapers.

    But then cutting down the military budget, or at least not keep increasing it, would be like cutting football from schools,right? Who cares if education and public hospitals go down the drain.

    So of course they will raise the debt, is for football… I mean the military budget.

  29. Peter Klopfenstein
    Aug 26, 2017 at 1:26 am

    Its hard to believe the Congress had the courage in the 1700s to declare independence and write a Constitution. Compared to the Congressional cowards of today, our forefathers were giants of courage

  30. Willy2
    Aug 27, 2017 at 3:12 pm

    – I can imagine that Fitch “has its doubts” when it comes to the creditworthyness of the US government. The Trump administration wants to increase “defense” spending, increase infrastructure spending, dole out tax cuts (for the (ultra-)rich.
    – To pay for those tax cuts the Trump administration wants to shrink Obamacare. But “shrinking” Obamacare has run into a brick wall.
    – And now people are surprised to see that Fitch “has its doubts” about the credit rating of the US ?

    • Willy2
      Aug 27, 2017 at 3:29 pm

      – I see another reason why Fitch “has its doubts”. Thanks to falling (long term) interest rates the US government saw its (total) interest payments fall in each of the years from 2008 up to say mid 2016. But in the 2nd half (/4th quarter) of 2016 those interest payments actually have started to rise.
      – I assume that Fitch saw the “writing on the wall” (rising interest payments, decelerating tax revenues), did the math and decided to issue a warning.
      – I am curious how all this will play out in the coming days and months.

  31. Willy2
    Aug 27, 2017 at 3:20 pm

    – Off topic: When I loook at the US 2 year yield since 2013 then it seems Mr. Market “didn’t get the memo” from the FED because that yield rose each year from 2013 onwards. In 2013 there was the “Taper Tantrum” and in 2014 the FED was “Tapering”. But the 2 year yield kept rising, even during 2015 & 2016. Again, Mr. Market seems to have mind of its own and ignored the memo that was issued by the FED.

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