After holding a AAA credit rating for decades—the highest possible—the U.S. saw its rating downgraded by Fitch Ratings to AA+, prompting a series of critical comments from government officials and other notable executives.
Janet Yellen, the Treasury secretary who missed the 2008 housing crash and recently called inflation transitory, called the downgrade “entirely unwarranted.”
Jamie Dimon, the JP Morgan Chase CEO, said the decision does not matter much because it’s the market, not the rating agencies that determine borrowing costs. He said the decision to downgrade the U.S. credit rating to a lower level than other countries that rely on Washington’s monetary policy and military for protection “ridiculous.”
“To have them be AAA and not America is kind of ridiculous,” Dimon told CNBC. “It’s still the most prosperous nation on the planet, it’s the most secure nation on the planet.”
The Global Times, the daily tabloid newspaper under the auspices of the Chinese Communist Party’s flagship newspaper, The People’s Daily, called the downgrade inevitable given “the steady deterioration in governance over the past two decades” in the U.S.
The paper said the move, when compounded by the worsening problems of the U.S. economy, will “gradually chip away at the U.S.’s economic dominance and its dollar hegemony as an ongoing de-dollarization continues to pick pace,” the paper reported, citing analysts.
Fitch said it based its decision on the “expected fiscal deterioration over the next three years, a high and growing general government debt burden, and erosion of governance relative to AA and AAA rated peers over the last two decades that has manifested in repeated debt limit standoffs and last-minute resolutions.”
The immediate implications are not expected to be severe, but countries that depend on the U.S. for financial stability have been hurt by the recent monetary tightening in the U.S., which drove up the value of the greenback against other world currencies.
Lian Ping, the chief economist and head of the Zhixin Investment Research Institute, told the Chinese paper that the good news for economies across the world is that “Fitch’s downgrade of its credit rating may also be part of the gradual decline of the U.S. dollar system.”
Ming Ming, the chief economist at CITIC Securities, told the paper that “more and more countries have started the de-dollarization process and Fitch’s downgrade of the U.S. rating may accelerate that process.”
Warren Buffett, the billionaire, took the same position as Dimon.
“Berkshire bought $10 billion in U.S. Treasurys last Monday. We bought $10 billion in Treasuries this Monday. And the only question for next Monday is whether we will buy $10 billion in 3-month or 6-month” T-bills, he said.
TRENDPOST: The White House rejected Fitch’s decision outright because it ruins the bullshit propaganda that “Bidenomics” is working for the average American. How is your family handling higher credit card payments? The average 30-year-fixed-rate mortgage is 7.922 percent. Good luck buying that first home.
The Fitch downgrade resulted in a sell-off in U.S. stocks and the benchmark S&P 500 fell 1.4 percent the following day.
Gerald Celente agreed with Buffett that people will still buy up Treasuries, but the Fitch downgrade signals the “beginning of the end” of the U.S. dollar.
“And the death of the dollar is going to come when they [Federal Reserve] lower interest rates,” he said. (See “DOLLAR’S VALUE SINKS FURTHER AS BIG BANKS TURN BEARISH” 25 Jul 2023, “PUTIN DECLARES ‘BEGINNING OF THE END’ FOR THE U.S. DOLLAR” 20 Jun 2023, and “SPOTLIGHT: BYE BYE BUCKS—DEATH OF THE DOLLAR” 2 May 2023.)
Celente said much of the world is tired of, not only the U.S. geopolitical hegemony, but also the economic hegemony…and this is just the beginning of the end.”
Celente has forecast, the 20th century was the American century and the 21st century will be the Chinese century. The stronger the Chinese economy grows, so too will it continue its ascent as the world’s largest trading partner.
As China dominates world trade, its yuan will dominate world trade and rival the dollar, if not supplant it, as a reserve currency.
While the dollar will not collapse as the world reserve currency overnight, its erosion has begun and, minus a wild card such as the end of the petro-dollar, will be slow and steady.