Would you rather lend money to the United States, or New Zealand? Going by credit rating alone, that could be a tossup, after Fitch Ratings downgraded its assessment of the U.S. on Tuesday.
Key Takeaways
- Tuesday’s downgrade of U.S. credit by Fitch caused the U.S. to slip below the European Union in the list of governments ranked by credit rating.
- The U.S. is now tied with New Zealand below 11 other governments.
- Some economists have downplayed the significance of the downgrade, noting that U.S. government bonds are still viewed as safe investments.
Before the downgrade, two out of the three major credit agencies gave the U.S. a perfect AAA rating, with Standard and Poor’s having reduced it a notch to AA+ in 2011. That meant the U.S. was above the European Union, which has an AA rating from S&P and is rated AAA by Fitch and Moody’s. Now, only Moody’s gives the U.S. a pristine rating, putting it even with New Zealand, the island nation with a population of 5.1 million and a gross domestic product on par with Utah.
As the table below shows, the U.S. is now barely hanging on to its status as one of the few governments in the world with at least one AAA rating from a major agency. Some economists dismissed the importance of the Fitch downgrade, and indeed, it didn’t threaten the status of U.S. government bonds as one of the world’s safest investments and a pillar of the global financial system.
| S&P | Moody’s | Fitch | |
| Australia | AAA | Aaa | AAA |
| Canada | AAA | Aaa | AA+ |
| Denmark | AAA | Aaa | AAA |
| Germany | AAA | Aaa | AAA |
| Luxembourg | AAA | Aaa | AAA |
| Netherlands | AAA | Aaa | AAA |
| Switzerland | AAA | Aaa | AAA |
| Norway | AAA | Aaa | AAA |
| Sweden | AAA | Aaa | AAA |
| European Union | AA | Aaa | AAA |
| Singapore | AAA | Aaa | AAA |
| United States | AA+ | Aaa | AA+ |
| New Zealand | AA+ | Aaa | AA+ |
| Liechtenstein | AAA | Not rated | Not rated |
However, in its downgrade, Fitch highlighted dysfunction in the U.S. government, including repeated showdowns over the debt ceiling that have called into question whether the U.S. would default on its debts, as well as the ever-ballooning national debt.
Source: https://www.investopedia.com/these-countries-now-have-better-credit-ratings-than-the-united-states-7569390?utm_campaign=quote-yahoo&utm_source=yahoo&utm_medium=referral&yptr=yahoo