My recent big prediction proved true this morning, which was that credit rating agencies will certainly not wait for an actual default on US debt before they start to downgrade US credit. Now, you might think that was an obvious prediction, but you didn’t hear many others warning about it; and US government officials certainly have not acted as if they realize that simple fact, nor said anything about it. So, it is an easy prediction that seems to elude almost everyone! And it is a BIG prediction because today’s news begins the downgrade process that will be devastating if it goes one step further. Today’s staunch credit warning from one of the nation’s big-three rating agencies puts our toes to the edge of the precipice. This morning Fitch placed a negative outlook on US credit. Fitch did one other thing that was very interesting in light of my own earlier article this week. (See: “Debt Default is Just a Terror Tactic, but it Will Blow up Stocks and Likely a Lot More, Regardless.”) It became the first I’ve seen in mainstream media to admit that failure to raise the debt ceiling does not inevitably lead to a credit default, noting that a default would only happen if the US chose not to prioritize debt payments over other expenses. So, there it is. Someone has finally said it in the mainstream media, though it was entirely glossed over in article linked to in the headlines below.
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