Maybe Fitch Had a Point After All?
The dismissive reaction to a US downgrade was revealing. Fiscal trends and broken politics shouldn’t be discounted.
Protesting too much.
Photographer: Drew Angerer/Getty Images
The reaction to Fitch Ratings’ recent downgrading of US government debt was more revealing than the announcement itself. Citing concerns about America’s long-term fiscal position and the risk that Washington’s political dysfunction could make matters worse, the company marked US debt down from AAA to AA+. The move was roundly attacked as “strange” and “completely absurd.” In an official response, Treasury Secretary Janet Yellen called it “arbitrary” and “outdated.”
True, the insight conveyed by any such assessment of US government debt is minimal. Investors and analysts have all the data they need to judge for themselves the risks attached to the world’s most widely traded assets. The new rating has no material regulatory implications and barely even registered with bond markets. In effect, Fitch was telling investors what they already knew.