Source: Wall Street Seewan
Author: Han Xuyang
Once the U.S. government touches debt defaults, even if it is only a few hours in a short time, it will cause catastrophic consequences.
On Wednesday evening in the Eastern Time, Fitch launched the first shot warning of the US government to include the "AAA" long -term foreign currency issuer's breach of contract (IDR) on a negative observation list, which means that the US rating may be loweredEssenceAnalysts of the agency warned that the dispute over the US political party was increasing, which was hindering a resolution to increase or suspend the upper limit of debt.
On the same day, in the column of the New York Times, analysts Joe Rennison pointed out that if the US government could not repay debts in the end, the three major rating agencies of Standard Pur, Moody's and Fitch will reduce the credit rating in the United States; Even if the agreement is reached shortly after the breach of contract, these institutions may not be willing to restore the US rating.
Due to the serious impact of fiscal breach of contract on the financial system, these three rating companies hope that government officials will reach an agreement before consuming cash -this situation may occur early next month.
Moody's warning said that in modern society, the United States has never intentionally defaulted, but even a brief breach of contract will change people's views on debt limit negotiations, which is a serious risk facing government reputation.Moody's chief American analyst William Foster said: "Our point is that we need to permanently reflect this in rating."
The institution has stated that if the US Treasury has missed a interest payment, its credit rating will be reduced by one level.If the United States wants to re -get the previous highest rating, legislators must significantly modify or completely cancel the debt limit.
If Fitch or Moody takes similar measures, it will be eliminated by the United States from the highest global bond issuer.Moody's only gives AAA rating to 12 countries. If it is really lowered, the US rating will be lower than Germany, Singapore and Canada.
It is difficult to avoid the reputation of the United States
Rennison also said that even if there is no real default, the US international status may be affected.
Foster said that after the so -called "X date" -that is, the government predicted by the Ministry of Finance will exhaust cash on June 1, Moody's may reduce its rating outlook for the United States.Moreover, even the temporary agreement of suspending the debt limit in the short term is not enough to appease the market's concerns.
A spokesman for Fitch believes that only a short -term agreement, rather than a long -term increase in the debt limit agreement, "only played a role in striving for time."The spokesman added that the development of the situation in the next few days will be the focus of the Fitch's rating evaluation.
Thanks to the status of the United States in the global economy, the US dollar is the leading currency of global trade, and US government debt is the world's largest debt market.Rennison believes that the questioning of US reputation will panic foreign investors and government, and they are the main holders of US debt.This panic may threaten US financing capabilities, and may even undermine the international status of the United States.
Indonesian Minister of Finance Sri Mulyani Indrawati said at the recent global financial leadership meeting that this is not a good thing for the United States.
Based on history, the painful price has been paid in 2011
In the 2011 debt limit negotiations, despite the two days before the Ministry of Finance expected to exhaust its cash, the United States finally reached an agreement and avoided breach of breach of contracts. Standard Purcell still reduced US credit rating by one level.
Subsequently, US stocks plummeted, market fluctuations intensified, the S & P 500 index fell 17.6%in just a few days, and did not rebound completely in the next six months.As a result, American families have suffered trillions of dollars of wealth losses, lending costs have continued to rise, and corporate and consumer confidence has been severely frustrated.
After that, the first time in the history of Standard Purcera, the first time the US credit rating was lowered from the highest level of AAA to AA+, and it remained at this slightly lower level that did not recover, because the US government's ability to manage finances "does notStable, not effective, unpredictable. "
John Chambers, then chairman of the Standard Purceded Sovereign Rating Committee, said: In the 2011 decision, the most important thing is the political environment, which is a very clear road to breach of contract.The current debate confirms that the S & P's reduction rating and maintaining unchanged decisions.
Economist warns that if the U.S. Congress does not take action before June 1, it may trigger an economic disaster.National fiscal debt default means that groups such as lenders, military personnel, and social security beneficiaries have not been paid. The interest rates may continue to soar, the global market is turbulent, the economic recession gradually approaches, and it has led to large -scale layoffs.
