To The Moon

Fitch Ratings, an international rating agency, downgraded the Long-Term Rating from "AAA" to "AA +", and its outlook changed from negative to stable. The reason is that the fiscal situation is expected to deteriorate in the next three years, and the government debt burden is high and increasing.

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In response, US Treasury Secretary Yellen immediately refuted it as "arbitrary and out of date".

Former US Treasury Secretary Summers said: "There is no doubt about the solvency of the United States."

The White House then issued a special statement saying, "At a time when President Biden achieved the strongest recovery of any major economy in the world,Downgrading the U.S. is Contrary to reality. "

Indeed, if you just look at the small non-agricultural ADP data released tonight, you really have to say that the US economy is currently in the strongest recovery moment-

On Wednesday, August 2nd, the ADP Employment Report showed that the number of private sector employees in the United States increased by 324,000 in July after seasonal adjustment, and it is expected to be 190,000, which is lower than the increase of 497,000 in June.

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Nela Richardson, chief economist of ADP, said: "The US economy performed better than expected, and the strong labor market may continue to boost household spending. And in the absence of mass unemployment, wage growth slowed down."

Then the problem comes, since the economy is so good and hot. Why does the U.S. Treasury need to open its "big mouth"?

On Wednesday, the U.S. Treasury Department boosted longer-term bond issuance in quarterly refinancing operations for the first time since early 2021,Up $7 billion to $103 billion from $96 billion, surpassing the $102 billion previously widely expected by traders,The auction covers 3-year, 10-year and 30-year Treasury Bond.

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Affected by the downgrade, global stock markets generally suffered Black Wednesday, and commodities also suffered a sell-off. I just explained in the live class why Fitch downgraded the AAA rating of the United States this time, which did not trigger the soaring market of gold when S&P downgraded its rating in 2011. The two are really in different backgrounds.

So, Will this sell-off be a short-term emotional impact or a continuous smash?

My personal understanding is that the downgrade is tantamount to raising the financing cost of the United States in disguise, which will actually force the Federal Reserve to maintain the current high interest rate level for a long time. In other words, the most dangerous moment of selling is today.If there is no chain reaction (which is the premise),Then, when the market sentiment is slowly repaired and smashed, it will be repaired slowly.

Given that Fitch's background is European, especially the French are likely to stand behind it. This is a stab behind the past, although it hurts, but it is not fatal, more like a declaration of threat. After all, the timing is not the American banking collapse crisis in March this year, nor the debt ceiling wrangling in May this year, but now.

Then, I think it is more like a kind of "forced palace". The subtext is: Federal Reserve, don't continue rate hike, O is not OK?

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