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Fitch’s Warning
by Karl Denninger Market-Ticker.org
Note the nonsense from CNN on the “reason” for this action:
Fitch Ratings downgraded US long-term debt late on Tuesday from AAA to AA+, citing this spring’s debt ceiling standoff as a major reason.
That’s a huge blow to the US. The global financial system relies on the promise that the US government will always pay back its debts. That trust makes the US dollar the most widely held currency worldwide. This downgrade threatens to complicate that.
Really? The US will always pay back it debts? How, when the Federal Government is running a deficit of about one dollar in three?
Think about this for 30 seconds: You have a $40,000 a year income in your family. Its pretty tight. So you spend $60,000. Every year. You start doing it when a virus closes your business and most people understand pulling out of the credit card when something terrible happens. But then the virus wanes, and you keep spending the same amount of money, and in fact you make all sorts of excuses for why. You don’t go back to spending $40,000, or $45,000. No, it must be $60,000 because you promised the kids four trips to Disney, and by God you’re going to take them.