Your Weekend Reading: US Creditworthiness Takes a Hit From Fitch

It was a torrid week for the bond market, a lackluster week for Apple and a mostly positive week for global economic data. China’s central bank said it will step up efforts to bolster the nation’s faltering recovery while the European Central Bank said core inflation has likely peaked. US payroll data showed job growth moderating in July but wages holding firm, adding to arguments the Federal Reserve has gotten the upper hand on inflation without triggering a recession or major job losses. The figures also bolster arguments the US central bank could be close to the end of its historic interest-rate hiking cycle. Then there’s the bond market, where the discussion over the past few days has turned from the economy to global public finances that deteriorated during the Covid-19 pandemic. Fitch this week stripped US government debt of its pristine, top-tier rating (something it warned of two months ago when Republicans were refusing to raise the debt limit, almost triggering an historic default). Despite criticism from Wall Street and Washington, the rating agency’s reasons weren’t a surprise: ballooning US deficits and political dysfunction. But there’s more to assessing US creditworthiness, Jonathan Levin writes in Bloomberg Opinion. “Some attention should also be paid to the role of inflation, a phenomenon that returned after a long hibernation, piercing naive notions of the nation’s inherent absence of risk.”

“Not guilty,” Donald Trump said again, this time in a Washington, DC courtroom as he faced the most serious charges leveled against him yet. The Republican was indicted by a federal grand jury for allegedly conspiring to defraud the US by interfering with the counting of votes in 2020, obstructing and conspiring to obstruct Congress’ certification of the election results and conspiring against the right to vote. Trump now faces 78 charges in three criminal cases that may reach trial just as the 2024 race heats up. And a fourth potential indictment looms in Georgia. Nevertheless, the twice-impeached former president wasted no time showing that those felony prosecutions will be a pillar of his campaign. “This is a persecution of a political opponent,” Trump proclaimed after his arraignment. The claim may appeal to his most fervent followers (and many of their donations are going to his legal defense), but Bloomberg Opinion editors contend “any sane voter should now see that he has no business returning to the White House.”