Good news from Fitch Ratings: they’ve decided to leave America’s credit rating set to AAA. From a Fox News report:
Fitch Ratings on Tuesday, citing the “exceptional creditworthiness” of the U.S., reaffirmed its highest AAA credit rating for U.S. debt.
Fitch, one of the ‘big three’ ratings firms along with Standard & Poor’s and Moody’s Investor Service, said the U.S. would maintain its coveted AAA rating because of the ability of its broad and diverse economy to withstand economic shocks.
“The affirmation of the US 'AAA' sovereign rating reflects the fact that the key pillars of US's exceptional creditworthiness remains intact; its pivotal role in the global financial system and the flexible, diversified and wealthy economy that provides its revenue base, Fitch said in a statement.
“Monetary and exchange rate flexibility further enhances the capacity of the economy to absorb and adjust to 'shocks'.”
Hmmm. I’m very grateful for the good news, but the particulars of this analysis are a little odd. Our economy is rapidly becoming less “broad and diverse,” as regulation dominates industry, and strangles those the government is not interested in consuming.
The overall economic impact from the 9/11 attacks has been estimated at $2 trillion. Does anyone think today’s beyond-broke, mortgaged-to-the-hilt economy could absorb that kind of “economic shock” today? Didn’t the government just tell us that failure to raise the debt ceiling by another $2 trillion would cause Social Security, veterans’ benefits, and even the National Weather Service to stop functioning?
As for our pivotal role in the global financial system, that role primarily consists of vacuuming all the credit from the far corners of the Earth. There is already a serious plan under way to replace the dollar as the global currency, and the Obama Administration is openly discussing another round of the “quantitative easing” that would only accelerate that process. We’ve also been treated to the spectacle of more taxpayer millions blown on a bus tour in which the President repeatedly states that the biggest problem in America is the ignorant rubes who won’t let him spend even more money, and especially those who won’t hand over more of their income to fund his disastrous agenda.
How “wealthy” is America now? Isn’t net worth calculated by comparing assets to liabilities? If the guys at Fitch crack an Accounting 101 textbook and apply that standard to the United States government, we’re in deep trouble.
Last year, a Boston University economist named Laurence Kotlikoff figured total U.S. government liabilities, including unfunded entitlement programs, added up to about $200 trillion. That’s almost nine times our Gross Domestic Product, which the gang at Fitch may have noticed is not growing fast enough to keep pace with population these days.
Reacting to Kotlikoff’s analysis, the Daily Bell asked: “Given these numbers, how can banks and institutions purchase US fixed income securities, let alone the dollar? What sense does it make? These large institutions, with fiduciary responsibility, are basically buying a bankrupt product.”
Apparently, it makes more sense to analysts at Fitch Ratings than Standard & Poor’s. Or Egan-Jones, Dagong Global Credit, or Weiss Ratings. They’ve all downgraded America, publishing analyses that read like the exact opposite of everything Fitch says. Here, for example, is what Florida-based Weiss Ratings said whey they graded Uncle Sam with a C-minus back in July:
Our downgrade today is not contingent on the outcome of the debt ceiling debate in Washington. It is driven exclusively by the numbers, which indicate that, in addition to a decline in the long-standing weaknesses we noted three months ago, the U.S. has already lost the golden halo that helped guarantee liquidity and acceptance of its government securities in global markets.
It looks like Fitch found that lost golden halo. I’d be careful to disinfect it before trying it on.