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Fitch Revises US Outlook To Negative

Tyler Durden's picture





 

French Fitch strikes back at the US for not pushing the Fed to do more to bail out Europe. Now it is US Moody's and S&P's turn...

Fitch Affirms United States at AAA; Outlook Revised to Negative
2011-11-28 21:15:35.907 GMT

FITCH AFFIRMS UNITED STATES AT 'AAA'; OUTLOOK REVISED TO NEGATIVE
 
Fitch Ratings-London/New York-28 November 2011: Fitch Ratings has today affirmed the United States (U.S.) Long-term foreign and local currency Issuer Default Ratings (IDRs) and Fitch-rated U.S. Treasury security ratings at 'AAA'. Fitch has also simultaneously affirmed the U.S. Country Ceiling at 'AAA' and the Short-term foreign currency rating at 'F1+'. The rating Outlook on the Long-term rating is revised to Negative from Stable.
 
The affirmation of the U.S. 'AAA' sovereign rating reflects still strong economic and credit fundamentals. U.S. sovereign liabilities, both the dollar and Treasury securities, remain the global benchmark and accordingly the U.S. credit profile benefits from unparalleled financing flexibility and enhanced debt tolerance, even relative to other large 'AAA'-rated sovereigns. The U.S. dollar's status as the pre-eminent global reserve currency and depth of the U.S. Treasury market render financing risks minimal and underpin a low cost of fiscal funding.
 
The U.S. economy remains one of the most productive in the world, reflected in levels of income per head that are substantially higher than that of major 'AAA' peers. Fitch's current assessment is that the U.S. economic recovery will regain momentum in the latter half of next year and into 2013, and that a period of above trend growth will be subsequently followed by growth of at least 2 and 1/4% over the long term. However, Fitch recognises that there is considerable uncertainty surrounding the economy's potential output and scope for a period of above trend economic growth. The longer productive capacity remains idle and unemployment high, the greater the likelihood that the loss of output (and taxreceipts) is greater than currently estimated, with negative implications for the medium to long-term fiscal outlook.
 
Fitch's revised fiscal projections envisage federal debt held by the public exceeding 90% of national income (GDP) and debt interest consuming more than 20% of tax revenues by the end of the decade, and including the debt of state and local governments - gross general government debt will reach 110% of GDP over the same period. In Fitch's opinion, such a level of government indebtedness would no longer be consistent with the U.S. retaining its 'AAA' status despite its underlying strengths. Such high levels of indebtedness would limit the scope for counter-cyclical fiscal policies and the U.S. government's ability to respond to future economic and financial crises.
 
The Negative Outlook reflects Fitch's declining confidence that timely fiscal measures necessary to place U.S. public finances on a sustainable path and secure the U.S. 'AAA' sovereign rating will be forthcoming following failure of the Congressional Joint Select Committee on Deficit Reduction (JSCDR) to agree at least USD1.2 trillion of measures to cut the federal budget deficit over the next 10 years as mandated under the Budget Control Act passed in August (BCA 2011).
 
The failure of the JSCDR underlines the challenge of securing broad-based consensus on how to reduce the out-sized federal budget deficit. Agreement and implementation in 2013 of a credible medium-term deficit reduction plan that would stabilise government indebtedness in the latter half of the decade would relieve downward pressure on the U.S. sovereign ratings, though by postponing the difficult decisions on tax and spending until after forthcoming Congressional and Presidential elections, the scale and pace of required deficit reduction will consequently be greater. Conversely, failure to reach agreement in 2013 on a credible deficit reduction plan and a worsening of the economic and fiscal outlook would likely result in a downgrade of the U.S. sovereign rating.
 
The inability of the JSCDR to reach agreement will trigger USD1 trillion of automatic across-the-board cuts in mostly discretionary spending, split evenly between defence and non-defence programmes, beginning in January 2013. If implemented alongside the caps on discretionary spending specified under the BCA 2011, discretionary spending will decline to an historic low of 5.5% of GDP by 2021. Further deficit reduction will not be credible if it relies solely on further cuts in discretionary spending rather than reform to entitlements and taxation.
 
The Negative Outlook indicates a slightly greater than 50% chance of a downgrade over a two-year horizon. Fitch will shortly publish its revised economic and fiscal projections for the U.S. and will conduct a further review of its sovereign ratings in 2012. However, in the absence of material adverse shocks, Fitch does not expect to resolve the Negative Outlook until late 2013, taking into account any deficit-reduction strategy that emerges after Congressional and Presidential elections.

 


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Mon, 11/28/2011 - 17:19 | Link to Comment Fips_OnTheSpot
Fips_OnTheSpot's picture

new CEO at Fitch any time soon

Mon, 11/28/2011 - 17:20 | Link to Comment nope-1004
nope-1004's picture

Jon Corzine.  Perfect fit.  Corrupt AND a bankster.  Imagine that?

 

Mon, 11/28/2011 - 17:34 | Link to Comment Saro
Saro's picture

"Corrupt AND a bankster."

But you repeat yourself.

Mon, 11/28/2011 - 17:43 | Link to Comment iDealMeat
iDealMeat's picture

Tangled web:  Fitch is partially owned by the Hearst Corporation.  A media company.

Richard P. Malloch
President
Hearst Business Media

Prior to joining Hearst, Malloch served as a principal in the New York office of Morgan Stanley & Co., where he was involved in corporate finance and merger and acquisitions. Malloch has devoted most of his professional life to working with companies in the communications and technology industries. He was actively involved in expanding the Morgan Stanley media franchise to include: cable television, cellular telephone, entertainment and information technologies. Malloch also helped to develop the media practice in Europe and Asia.

Malloch began his career as a member of the policy staff to the assistant secretary of the U.S. Department of Energy in Washington, D.C.

 

And..

Fitch Ratings is headquartered in New York and London and is part of the Fitch Group. In addition to Fitch Ratings, the Fitch Group also includes Fitch Solutions, a distribution channel for Fitch Ratings products and a provider of data, analytics, and related services.

The Fitch Group is a majority-owned subsidiary of Fimalac, S.A., headquartered in Paris, France. For additional information, please visit fitchratings.com or fimalac.com.

Tue, 11/29/2011 - 08:26 | Link to Comment Archduke
Archduke's picture

A new CEO won't happen.  essentially FIMALAC, a.k.a. Financière Marc Ladreit de Lacharrière, is owned by the

legendary ENArque to the tune of 80%, and it owns 60% of Fitch.  ie Fitch is not public: it is a private company.

Hearst only owns a minority 40% stake, and essentially provides the raw data needed for rarings intelligence.

 

Mon, 11/28/2011 - 17:34 | Link to Comment Chief KnocAHoma
Chief KnocAHoma's picture

First we carpet bomb 'em.

How dare they say the emperor has on no clothes!

Mon, 11/28/2011 - 18:52 | Link to Comment CitizenPete
CitizenPete's picture

 

MF Global Mastermind Corzine, Designed Obama's Economic Policy - Peter Schiff Reports


http://www.youtube.com/watch?v=R8AuNU2ujL0

 

Mon, 11/28/2011 - 20:12 | Link to Comment baby_BLYTHE
baby_BLYTHE's picture

google Jacon Schiff. Along with the Rockefeller, Warburg, Rothschild, Morgan, etc. the Schiff banking family has been source for global military conflict, funding of global political revolution, installment of puppet governments and all out looting of nation states. I appreciate Peter's support of Ron Paul but I would be careful of his advice as much seems self-serving and expediaint.

Mon, 11/28/2011 - 17:33 | Link to Comment HedgeAccordingly
HedgeAccordingly's picture

AHH .. this must be why the SPOOZ rallied 10 handles into the close.. DOH - 

look at this - http://hedge.ly/sWL2Ed

Mon, 11/28/2011 - 17:40 | Link to Comment GeneMarchbanks
GeneMarchbanks's picture

Usually you post bitches in tight clothes & such. This was worse than getting Rickrolled...

I prefer not to look at such things for they are all too clear.

Shame on you.

Mon, 11/28/2011 - 18:01 | Link to Comment HedgeAccordingly
HedgeAccordingly's picture

lol.. sorry buddy.. here is a chick from today http://hedge.ly/gFWVSm . ferrari and hizzy's 

Mon, 11/28/2011 - 18:45 | Link to Comment iDealMeat
iDealMeat's picture

I saw a little better video of Paris then your pic post.

Mon, 11/28/2011 - 17:37 | Link to Comment johnu78
johnu78's picture

How about Andy Fastow, I hear he's trying to make a comeback!

 

-John
150,000 Persian Missiles Will Be Thrown Against Israel
http://johnu78.blogspot.com/2011/11/150000-persian-missiles-will-be-thrown.html

Mon, 11/28/2011 - 17:19 | Link to Comment SHEEPFUKKER
SHEEPFUKKER's picture

You better eat your peas or you do not get any dessert.  Ouch, that hurts. 

Mon, 11/28/2011 - 17:44 | Link to Comment Long-John-Silver
Long-John-Silver's picture

Peas are the main course and dessert as well when you can't afford anything else.

Mon, 11/28/2011 - 17:19 | Link to Comment a growing concern
a growing concern's picture

Enough foreplay already.

Mon, 11/28/2011 - 17:20 | Link to Comment Odin
Odin's picture

Bullish

Mon, 11/28/2011 - 17:20 | Link to Comment Temporalist
Temporalist's picture

Yes they gave it negative but the spin is USAAA!

Mon, 11/28/2011 - 17:21 | Link to Comment Ignorance is bliss
Ignorance is bliss's picture

The French know bankrupt when they see it.

Mon, 11/28/2011 - 17:34 | Link to Comment johngaltfla
johngaltfla's picture

Yup, revenge of the French. Too bad we've not leanred to appreciate Brie.

 

http://youtu.be/QMtslxZUr6M

Mon, 11/28/2011 - 17:21 | Link to Comment azzhatter
azzhatter's picture

It must be because Reggie Love is leaving 

Mon, 11/28/2011 - 17:36 | Link to Comment mynhair
mynhair's picture

Who the fuk is Reggie Love, and why do you know it?

And no, I ain't googling this shit, cuz I really don't care.

Mon, 11/28/2011 - 17:21 | Link to Comment mktsrmanipulated
mktsrmanipulated's picture

why did bloomberg report it to neutral????

 

Mon, 11/28/2011 - 17:22 | Link to Comment Caviar Emptor
Caviar Emptor's picture

Not to worry: We will be bailing Europe, atacking Iran and keeping drones aloft over every country on a 24/7 basis. 

And at the end of Year #4 the score is : Bansters 100, Citizens 0

Mon, 11/28/2011 - 17:32 | Link to Comment Ragnar24
Ragnar24's picture

Country or County? I'm guessing we'll have the National Guard in front of every home... you know, "for our own good":

http://www.prisonplanet.com/yes-americans-will-be-targeted-as-terrorists...

Mon, 11/28/2011 - 17:37 | Link to Comment Caviar Emptor
Caviar Emptor's picture

Right. It will become necessary to imprison US citizens without trial or charge. For more information, please proceed to the Ministry of Secret Police. The address is secret

Mon, 11/28/2011 - 17:46 | Link to Comment sabra1
sabra1's picture

so people, when they come for your gold, what do you do?

Mon, 11/28/2011 - 18:08 | Link to Comment max2205
max2205's picture

I am reading where Homeland security is trying to train dogs to sniff out gold.

Mon, 11/28/2011 - 17:25 | Link to Comment GeneMarchbanks
GeneMarchbanks's picture

Whoa nelly!

Todays ramp was tomorrows dump? You don't say.

Cue Robot Re Gorilla Paper demand etc etc...

It's like a really bad action movie out there...

Mon, 11/28/2011 - 17:22 | Link to Comment dereksatkinson
dereksatkinson's picture

maybe the dollar will be down on this lol

Mon, 11/28/2011 - 17:22 | Link to Comment rosex229
rosex229's picture

Now Moody's just has to respond with a downgrade, and we'll get incredible market volatility... oh wait...

Mon, 11/28/2011 - 17:23 | Link to Comment dukeland
dukeland's picture

It is just trying to get into line with S&P and Moody's...let go to sleep (or smoke more hopium)

Mon, 11/28/2011 - 17:24 | Link to Comment carguym14
carguym14's picture

Wonder what Tim Geithner thinks the odds are?

Mon, 11/28/2011 - 17:27 | Link to Comment SheepDog-One
SheepDog-One's picture

Oh....so if we go MORE into debt, then Fitch will see US debt as 'more favorable'...oh I see. Must be time to eat more peas again.

Mon, 11/28/2011 - 17:27 | Link to Comment Mark123
Mark123's picture

Did you also hear that Fitch has downgraded Zimbabwe to BBa- with a positive outlook. 

Mon, 11/28/2011 - 17:31 | Link to Comment Odin
Odin's picture

In other news from Zimbabwe: They rapin' everybody up in here

 

http://www.bbc.co.uk/news/world-africa-15876968

Mon, 11/28/2011 - 17:32 | Link to Comment mynhair
mynhair's picture

Send 'em Erin Burnout.

Mon, 11/28/2011 - 17:29 | Link to Comment NoMoreBull
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Breaking News:   French sources have reported what they believe to be U.S. Predator Drones circling over Paris!

Mon, 11/28/2011 - 17:43 | Link to Comment PaperBear
PaperBear's picture

I almost busted my gut laughing.

Mon, 11/28/2011 - 17:31 | Link to Comment mynhair
mynhair's picture

Extremely bullish.  LSAP is so close now, I can smell it.

Smells like Harry Reid in summer.

Mon, 11/28/2011 - 17:48 | Link to Comment sabra1
sabra1's picture

after he did janet napolitano after her period!

Mon, 11/28/2011 - 17:31 | Link to Comment B-rock
B-rock's picture

Yikes! ES down half a point!

Mon, 11/28/2011 - 17:31 | Link to Comment Sunset chaser
Sunset chaser's picture

Is there realistically any chance that the US government will ever pay off its debts and return the country to sound economic footing?

Looks to me the best thing the USA has going for it in this crisis is it isn't domino number 1. But once they start falling it will be soon enough.

Mon, 11/28/2011 - 17:33 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

The US is going to need an IMF bailout.

Mon, 11/28/2011 - 17:35 | Link to Comment Seditious Blasphemer
Seditious Blasphemer's picture

I do believe it is Webster Tarpley who says, "It will start in Europe, then the US and the accelerated fall of the $ will follow shortly there-after." Also, Zerohedge newbie here... Bitchez.

Mon, 11/28/2011 - 17:35 | Link to Comment PaperBear
PaperBear's picture

KABOOM

Mon, 11/28/2011 - 17:36 | Link to Comment AbandonShip
AbandonShip's picture

"taking into account any deficit-reduction strategy that emerges after Congressional and Presidential elections"

Best joke of the day!

Mon, 11/28/2011 - 17:37 | Link to Comment fonzanoon
fonzanoon's picture

The Negative Outlook indicates a slightly greater than 50% chance of a downgrade over a two-year horizon. Fitch will shortly publish its revised economic and fiscal projections for the U.S. and will conduct a further review of its sovereign ratings in 2012. However, in the absence of material adverse shocks, Fitch does not expect to resolve the Negative Outlook until late 2013, taking into account any deficit-reduction strategy that emerges after Congressional and Presidential elections.

 

This says it all. The ratings agencies have made their beds. They would rather go down with the ship.

Mon, 11/28/2011 - 17:37 | Link to Comment Spitzer
Spitzer's picture

I wonder how well JesseCafeAmericain's "short stocks long gold" play worked today..

Mon, 11/28/2011 - 17:41 | Link to Comment Caviar Emptor
Caviar Emptor's picture

With the right connections, you can send predator drones to anyone's home or office to settle any "business issues". There, that was easy

Mon, 11/28/2011 - 17:42 | Link to Comment unirealist
unirealist's picture

Deficit reduction isn't going to help.  There is so much accumulated malinvestment in the system that only a system-crashing PURGE can restore production/consumption balance.

Even a massive debt-forgiveness program (a debt jubilee) would be futile.  The malinvestment would remain even if all the debts were gone.  Before the dust settled, the debts would re-appear.

Everything must change.

Mon, 11/28/2011 - 17:44 | Link to Comment Caviar Emptor
Caviar Emptor's picture

Sorry. We've already made the decision that malinvestment and imbalances are so bad that  a purge would end the Republic

Mon, 11/28/2011 - 17:49 | Link to Comment Ted K
Ted K's picture

Dear Fitch,

Fuck you, fuck all your Moms, fuck your ratings, but most importantly:

FUCK THE BOND MARKET

Signed,

Humanity

Mon, 11/28/2011 - 18:26 | Link to Comment PulauHantu29
PulauHantu29's picture

Time for Congress to call in Fitch to "explain."

Mon, 11/28/2011 - 21:24 | Link to Comment Bansters-in-my-...
Bansters-in-my- feces's picture

No grassy knolls for Fitch employees.

Do NOT follow this link or you will be banned from the site!