A Fitch Downgrade Wouldn't Matter

Fitch, the ratings company, just announced that it placed the U.S. government on "rating watch negative" meaning it might reduce the country's AAA credit grade. It doesn't matter very much.

Fitch, the ratings company, just said that it placed the U.S. government on "rating watch negative" meaning it might reduce the country's AAA credit grade. It worries that the Treasury may not be able to make all of its debt payments on time without raising the debt ceiling, now being held up by a congressional stalemate. It also worries -- wrongly -- that "prolonged negotiations over raising the debt ceiling" would endanger "confidence in the role of the U.S. dollar as the preeminent global reserve currency," which is supposedly "a key reason why the U.S. 'AAA' rating can tolerate a substantially higher level of public debt than other 'AAA' sovereigns." Fitch might be right about the risks, but its decision to downgrade (or not!) shouldn't have much of an impact.

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