'Fitch Ratings' recent downgrade of United States debt one notch from AAA to AA+ is still much too sanguine. America’s debt today should be rated closer to junk than to top-notch.' -robertewright
one notch from AAA to AA+ is still much too sanguine. America’s debt today should be rated closer to junk than to top-notch.
Market evaluation of America’s debt is also distorted. In Hamilton’s time, the prices of public debt obligations served as a reliable guide to creditworthiness. Under his fiscal policies, the price of America’s public obligations quickly rose from a few pennies on the dollar to above par. American economic independence from Britain was definitively achieved when the yields on its bonds dipped below those of the Mother Country, in Britain’s own markets no less.
In the same breath that Hamilton extolled the virtues of public credit, however, he warned that the national debt could become excessive and hence a net burden. It became excessive by his metrics following the government’s unwarranted bailouts during the Global Panic of 2008, which triggered the downgrade by S&P. The Great Pandemic of 2020 occasioned another burst of unwarranted bailouts, and the massive borrowing, deficits, and inflation that triggered Fitch’s downgrade.
Second, the Treasury should never borrow money to stimulate the economy or to transfer resources from one citizen to another, or from the citizens of this nation to those of another. It should borrow only for emergencies, such as just wars, and when tax receipts prove insufficient to service the debt during an economic downturn.
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