Will Biden Repeat Obama with US Debt Downgrade?

May 25, 2023 By E.J. Smith - Your Survival Guy

President Barack Obama and Vice President Joe Biden are briefed by Rob Nabors, Assistant to the President for Legislative Affairs, during a meeting in Chief of Staff Bill Daley’s West Wing office at the White House to discuss ongoing efforts to find a balanced approach to the debt limit and deficit reduction, Saturday, July 30, 2011. (Official White House Photo by Pete Souza)

In 2011, after years of unhindered stimulus spending by the Obama administration, Standard & Poor’s downgraded America’s AAA credit rating. Now, Fitch is poised to do the same in response to Joe Biden’s refusal to negotiate a deal to cut spending in return for an increase in the debt ceiling. Ruth Carson reports in Bloomberg that Fitch has placed its AAA rating for US debt on negative watch, writing:

The tension around the US debt-limit negotiations ratcheted up after Fitch Ratings warned the nation’s AAA rating was under threat from a political standoff that’s preventing a deal.

Fitch may downgrade its assessment to reflect the increased partisanship that is hindering a resolution despite the fast-approaching so-called X date, it said, referring to the point at which Washington runs out of cash. It moved the US to “rating watch negative” under its classification. Meantime, DBRS Morningstar placed the US ratings of AAA under review “with negative implications.”

Markets have been showing increasing nervousness over the standoff, with Treasury-bill yields slated to mature early next month surging past 7%, while the S&P 500 Index has declined for two days. Economists project a US default could trigger a recession, with widespread job losses and a surge in borrowing costs.

Action Line: Protecting America’s place in the global economy is important. You can read here in my latest research report from Paris and Rome that the dollar is losing respect abroad.

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E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zildjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West (RIP JB) and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com To sign up for my free monthly Survive & Thrive letter, click here.

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