In light of its deteriorating balance sheet and explosive borrowing, I am lowering my credit rating of the US government by one notch. The US Treasury announced this week it intends to borrow over one trillion dollars this fiscal quarter. Much of these borrowings will be used to repay prior borrowings, and there appears to be no effort to restrain uncontrolled debt growth.
This does not imply Treasury will fail to pay principal and interest due its lenders. But the likelihood of the dollars paid having the same purchasing power as the dollars lent is low. The markets are demanding higher yields to compensate.
This follows yesterday’s action by Fitch announcing a ratings downgrade. The response of the Treasury Secretary was to fault the messenger and blame the prior administration. A more constructive response would be to find ways to curb debt growth.