Absurd-onomics #1

From A-List to B-List: The United States’ Dramatic Credit Rating Downgrade!

8 min readAug 15, 2023

In the tangled web of financial jargon and economic shenanigans—

Very few phrases can whip up a ruckus quite like a credit rating downgrade📉

It’s like watching your favorite Netflix show suddenly get a lower IMDb rating — you know something’s up, and you’re not sure whether to continue the binge.🎬

Case in point — The recent Fitch downgrade of the United States’ credit rating from AAA → AA Plus.

It’s the kind of news that sends shockwaves through Wall Street and leaves financial pundits scratching their heads. 🤯

But hold onto your calculators, folks, because we’re about to dive deep into this financial rabbit hole. Beyond the flashy headlines and stock market frenzy lies a tale of economic resilience, political maneuvering, and global financial gymnastics that’s juicier than the latest celebrity gossip.

In this article, we’re embarking on a journey to demystify —

The Fitch downgrade saga.
Deciphering the cryptic language of credit rating, debt ceilings, and Dollars drama.
Juggling rates and cash conflicts in the Economic circus.
A whole lotta absurdity.

So, grab your popcorn and dictionaries, let’s unravel the saga of our economic reality. 🌎

The Fitch Downgrade: Breaking Down the Big Words

Ever heard the term “credit ratings”? 📊

Well, they’re like movie ratings for countries and corporations. Fitch, S&P Global, and Moody’s play the role of grumpy critics, handing out grades like A, B, C — no gold stars, though. 🌟

Now, here’s the scene — Fitch gives the United States a thumbs-down, taking it from AAA → AA Plus. It’s like they just downgraded America from a blockbuster movie to a B-list rom-com. 🎞️

But wait, why the downgrade? Well, let’s just say the United States’ debt situation is like that messy closet you swear you’ll clean but never quite manage.

Hold up, though! Credit ratings aren’t like magical fortune tellers predicting financial doom. They’re more like those astrology apps — interesting, but not a guide for life-changing decisions. 🌌💰

Fitch’s decision was fueled by concerns like—

Interest rates going on a roller coaster ride 🎢
Debt-to-GDP ratio shooting for the moon 🚀
Mid-Term Money Hiccups (oops!) 🤦
Government spending like a teenager with a credit card 💳
Governance taking a little stumble 👞

Fitch looked at all these factors and thought, “Hey, maybe we should adjust that rating knob a bit.” It’s like being downgraded from a luxury suite to a comfy room — not exactly a catastrophe, but something to pay attention to.

Debt Ceiling Drama: Balancing Act and Fiscal Fireworks

Picture this — you’re at a party, but you can only party as long as you have drink tickets. That’s the US debt ceiling for you. It’s like a budget, but for Uncle Sam. 🏦

Created in 1917, the debt ceiling sets a bureaucratic speed bump that keeps the national debt from going on a wild roller coaster ride.

Flashback to 2011→ the U.S. had a financial showdown, resulting in its first-ever credit rating downgrade. Drama, right? Now, in 2023, it’s like a sequel, the debt has hit a whopping $32.6 trillion, which is 122.8 % Debt to GDP.

Yes, you read that right — Trillion with a “T” 💰

This ceiling drama isn’t new —

It’s like a recurring reality show. Since 1960, it’s been raised over 78 times, with Republicans holding the spotlight 49 times and Democrats 29 times. It’s like a political seesaw that never really finds balance.

But is it all just drama?, or should we be genuinely concerned?

The big “oh no” is a default — like not paying rent but globally catastrophic. Economists predict skyrocketing interest rates, job losses, and inflated everything.
Goldman Sachs predicts the debt default may halt 10% of the US economy. Ouch!!🚧
Beyond US borders — debt drama matters. It’s like Jenga — remove the US dollar, and the global financial tower wobbles.

For last-minute drama dodging, enter “extraordinary measures” by the Treasury — temporary cooling solutions to avoid total chaos.

But like a snowman in summer, the chill can’t last forever.

Is It Time to Pull the Debt ceiling Plug? — 🔌

Some experts say the debt ceiling is like an old smartphone — it served a purpose, but it’s time to upgrade. Others say it’s like having a financial referee — a way to keep Uncle Sam’s spending in check.

It’s either a necessary evil that keeps Congress accountable or a relic causing unnecessary turmoil.

As the debt ceiling drama continues, this fiscal show’s still running and can make or break economies.

Dollar Dilemmas: Can the King Hold His Throne?

Ah, the good old US’s greenback 💵 — the heavyweight of champ currencies that doesn’t just flutter in the wind, it flexes its muscles across the world stage. 💪

The US dollar isn’t just money; it’s like the VIP pass to the international party that every country wants to get in on.

But is the world’s ultimate currency about to go all Game of Thrones on us?👑

There are some folks pointing their fingers at the dollar’s recent Fitch downgrade drama and screaming, “Trouble ahead!”. They’re blabbering about —

Interest Rates Rise, Pockets Shrink
Economy: Meh Mode On
US Politics: Road of Chaos
Other Currencies Flashing Their Biceps 💪
Eek! Recession Lurking?

All this chatter has people contemplating a potential “adios” to the dollar.👋

Meanwhile, the euro’s giving it that “I’m watching you” squint, the yuan’s pumping iron like there’s no tomorrow, and cryptocurrencies? Well, they’re like those new kids on the block causing a buzz nobody saw coming.

China and its buddies are making moves, flirting with different currencies, swapping yuan and rubles like they’re collecting rare cards.

But hold up, folks — let’s not ignore the elephant in the room.

The dollar’s got more lives than a cat. Its unmatched liquidity, stability, and the sheer audacity of being the currency everyone knows.

Its not giving up its crown without a showdown, and this global currency battle is the show everyone’s watching.

The Economic circus: Debt, Interest Rates and Their Butterfly Effect

Now, let’s talk about the Economic circus –

Imagine you’re juggling flaming torches while riding a unicycle. That’s governments trying to balance debt, interest rates, and fiscal responsibility.

Initially, borrowing money’s all fun and games — like a spontaneous weekend with your credit card. But then interest rates go up, and suddenly, it’s vacation bills on steroids. 💸

Interest rates — they’re like the puppet masters pulling the strings of the economy. As rates go up, the dance partners — consumers and businesses — have to adjust their steps.

Rising interest means pricier loans, making budgets tighter than post-buffet skinny jeans.

All these aren’t just numbers on a chart; it’s high-stakes decision time, where Governments face the ultimate dilemma:🤷‍♂️

Choosing whether to go for infrastructure and healthcare projects or prioritize debt repayment? — a bit like choosing between a new iPhone vs. retirement fund — today’s call impacts the financial future.

Now, let’s peek into recent news.

US prices rollercoaster at 3.2% inflation 🎢
UK’s Bank of England rides rates to a 15-year high
Eurozone’s inflation slows down to 5.5% 🐌

All these look like a global bonanza! Central banks are playing musical chairs with interest rates, and guess what? Nobody knows the final song! 🪑🎶

So, enjoy the economic circus, where governments and banks star — balancing, juggling, and dancing to interest rates rhythms. Remember! We’re all in this dance together! 🕺🏽💃🏼

The Crowding-Out Effect: The Battle for Cash

Picture a buffet battle over the last piece of cake — now that’s a struggle reflecting the “crowding-out effect,” a clash where unchecked government borrowing elbows aside private players at the borrowing buffet.

As governments rack up debt for grand projects, demand for loans skyrockets, pushing interest rates high — affecting businesses.🚨

Due to this, the yields of Government bonds outshine private investments, stifling startups.

Fast forward to today — The Federal Reserve’s balance sheet is bloated, To curb inflation, the money supply needs a strict diet.

As the government’s fiscal spreadsheet peaks while private sectors shrink. Inflation charges ahead, the money supply diminishes, and the GDP contracts, leaving private investments struggling for air.🌬️

In this narrative, rate hikes hit the private sector hard without reduced government spending. Higher taxes and limited credit access follow, dampening productivity, innovation, investments, and wages.

Meanwhile, the government enjoys cheaper borrowing.

Will government and private sector find harmony??, or will fiscal rivalry persist keeping the innovation train stuck at the station?🚉

Closing Act: The Show Must Go On, Right?

As the curtain falls on our exploration of finance, credit ratings, and the intricate dance of economics, what have we learned?🎓

Economics is like an escape room where every clue leads to another, and the exit is constantly shifting.🚪

Fitch’s dramatic “you’re not that great” rating, the debt ceiling spectacle, the dollar caught in an identity crisis — every twist and turn is like a plot twist scene in a Christopher Nolan film, leaving us with more questions than answers⁉️

Yet, history whispers tales of the United States’ resilience. From the Great Depression to the 2008 financial crisis, the nation’s spirit of innovation and adaptation has been its compass.

Let’s not forget the U.S.’s role as a global powerhouse. This isn’t just a nation; it’s an economic juggernaut, a diplomatic heavyweight, and a haven of innovation.

Remember — finance isn’t just about numbers on spreadsheets — it’s about the stories they tell, the challenges they pose, and the resilience they reflect.

The road ahead may be dotted with question marks, but also exclamation points of opportunity.