Guess whose credit got dinged?

Fitch, a credit rating agency, downgraded US government debt from triple-A. Does it matter? 

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Downgrading democracy?
Welcome to the Know the Difference Minute for Wednesday, August 2nd.
Fitch, a credit rating agency, downgraded US government debt from triple-A. Does it matter?
No. Investors don’t look to a credit rating agency to figure out whether the US Treasury will repay its debt.
Credit ratings are supposed to reflect the risk of default. When a country issues debt in its own currency, anything less than a AAA rating reflects something besides credit risks.
It may be that taxes need to rise, spending needs to fall, or the government needs to inflate away the debt, but it always has the ability use or issue dollars to make debt payments when due.
Fitch cited the recent debt ceiling drama in its decision. That reflects more on politics than on credit. Fitch may prefer that the budget and debt process be calmer, but our democracy has been messy from the beginning. It’s just more visible now.
I’m Brian Jacobsen, Chief Economist at Annex Wealth Management. That is your Know the Difference Minute