EverydaySpy Podcast - Recession, Housing and Financial CRASH | EMERGENCY Podcast

Episode Date: August 9, 2023

The drop in credit rating for the US government by Fitch is another strong indicator that American financial health is struggling. Along with persistent inflation, a struggling tech sector, and the highest interest rates in decades, the inability of the federal government to maintain strong credit is a sign that Americans need to fight back against the kind of brinkmanship politics that have become common in Washington. Life is about to get much more difficult for you and me, all because our politicians fail to respect taxpayer dollars. Find your Spy Superpower: https://everydayspy.com/spyquiz Learn more from Andy: https://everydayspy.com/ Join the SpyTribe: Facebook: https://www.facebook.com/EverydaySpy/ Instagram: https://www.instagram.com/everydayspy/ Twitter: https://twitter.com/EverydaySpy Learn more about your ad choices. Visit megaphone.fm/adchoices

If anybody out there is running a business, a small business, or even looking to find a way to grow their business through venture capital, you can expect it's going to be quite a bit more difficult now to secure outside money at all for your business endeavors. If you've been looking at buying home, you can again expect the purchasing power of your dollar to go down as the interest rates go up. This is all but guaranteed right now with this announcement from U.S. credit was just downgraded by Fitch rating company. Now, Fitch is a credit rating company that's American-owned. It's actually held by a larger parent company, and it has a fantastic reputation. Now, the White House and multiple members, senior members of U.S. government are calling this downgrade everything from arbitrary to unwarranted to unprecedented.

And the truth is, it's none of those things. Now, Fitch, as early as 2022, was already warning the U.S. economy in the U.S. economy and the U.S. policymakers that it was willing to downgrade our rating from AAA to AA plus, which is not a large downgrade, but it is a symbolic downgrade. Now, despite those warnings, we continue to see U.S. policymakers continue to push that brinksmanship politics that have been driving Americans crazy for multiple years now. The crisis with debt ceilings, the constant last-minute approval of budgets, these are behaviors that in you and me as credit-bearing individuals, our credit cards wouldn't accept. No bank would accept us calling in on the day a bill is due to tell them that we just need

a few extra days to think about whether or not we're going to pay it. It's ridiculous. It actually shows you are not a reliable credit-holding individual. So why would our government think that doing the same kind of behavior at senior government levels is going to be something that the American people or that credit ratings accept. Now, the reason that this move is not unprecedented is because in 2013, Standard and Poor, the third largest credit rating in the world, did the exact same thing. They downgraded the U.S. credit score from perfect to AA plus, from AAA to AA plus. Since 2013, we've been carrying a downgraded credit rating from Standard and Poor. So it's not that Fitch's move was anything unique or unprecedented, like I said. In fact, it's a second data point in a trend

among the top three credit agencies. That means as of right now, if you look at the top three credit agencies, two out of the three, no longer think that the United States deserved or is worthy of their highest credit score. That is something that we need to accept, and that's something that I hope our policymakers will look at and take very seriously, because our fiscal future is very much in question. We have seen multiple hikes to our interest rate over the last few years. We've seen 11 total interest rate hikes that have brought us to a place where we are continuing to fight self-imposed inflation inside the United States with increasing hikes that are damaging the housing market, the automobile market, and any other market for loans that's out there.

So now on top of that, we also have this downgrade to our credit rating and global competition over U.S. currency. Because as the credit rating of U.S. sovereign debt goes down, what that means is that faith and confidence in the U.S. dollar also goes down. And that means the dollar's value, the dollar's confidence is going down at a time when Chinese are really pushing the run-men be, their own home currency. And Bricks, the trading block of Bricks, is considering launching a brand new currency that's pegged to gold instead of pegged to the U.S. dollar. And that's a currency they're planning to announce as early as August right now this month. So this rating drop comes at a very, very challenging time. Now, what does this mean for you and me? It means a couple of really important

things. First, if you've been struggling to get that loan to buy a house or buy a car, it's not going to get any easier. In fact, you can expect base interest rates to most likely go up again. And now in the face of this credit rating, you can also expect the purchasing power of the dollar to go down. That means anything you buy from overseas, is likely going to be more expensive. So if the car you've been looking at is Toyota or Honda or Kia, you can expect those prices to actually go up in the coming months with the announcement of this credit hike.

If you've been looking at buying a home, you can again expect the purchasing power of your dollar to go down as the interest rates go up. This is all but guaranteed right now with this announcement from Fitch. If you consider what happened to the stock market overnight, the stock market dropped almost 2% in all categories. That's not a massive drop in terms of total volume from top to bottom, but the fact that it hit multiple sectors, all industries,

it left kind of an aftershock in the financial markets around the entire world. If anybody out there is running a business, a small business, or even looking to find a way to grow their business through venture capital, you can expect it's going to be quite a bit more difficult now to secure outside money at all for your business. endeavors. Whether you're trying to ask for a loan for your small business or whether you're trying to actually qualify for a larger loan to scale your business or even if you're looking to sell your business or have outside investors invest in your business, the actual price of capital, the cost

of the money itself just went up around the United States. So everybody's going to be watching their money a little bit tighter and holding on a little bit longer because they're unsure if it belongs in the stock market or if it belongs invested in some other part of the economy, or frankly, if they will have a higher return and a higher credit confidence, if they take their U.S. dollars and invest them abroad. That's what's so damning about this credit rating, is that now not only is global confidence in the U.S. dollar going down, which it has been for a long time now, but we also have to ask the question whether U.S. dollar holders are going to start moving their dollars offshore because the investment options are better and more stable and more confident elsewhere.

So that's what you're looking at. That's what I'm reading. That's what's so important about this credit drop from Fitch. So if you've been wondering whether or not now is the time to buy that car or buy that house, it's kind of in your best interest now to act quickly. Similarly, if your money is already tied up in the stock market, the stock market has dropped. So you've already lost perceived value in that money because of the drop. So now is not the time to sell.

Instead, now is the time to wait. And for damn sure people, now is the time for us to make sure that the people we vote into office, into office from Congress to Senate to the White House, make sure they understand that we are not going to tolerate this brinksmanship political bullshit anymore. Because the truth is the damage that you and I are paying for is coming from politicians who refuse to get along. And that's juvenile. This is the kind of stuff that any grade school teacher is going to know that you break these people. up and you slap them on the wrist and you tell them they have to get along because I came from a school where you had to cooperate to graduate. You probably heard the same thing. So how in the world

is it that our senior leaders can't take a lesson from high school gym class and make something better happen than what we've seen happen already? If you feel frustrated by the fact that our policymakers seem to somehow get the opportunity to act like children with their credit, where you and I don't get to act like children with our credit, you're exactly right. It's not fair. It's not right, which is why Fitch's decision to downgrade the U.S. credit rating was the right call. And all the reverberations and all the repercussions that are going to come from it are also important and necessary to the long-term fiscal health of the United States. I feel okay with that. I feel comfortable with that. It makes me have hope again. In the past few years, as I've been looking

forward to what economic outlook lies ahead, it hasn't been positive. And a big part of why it hasn't been positive is because I don't trust that the policymakers that we have in office are doing the fiscally responsible thing. Now there's an independent credit agency out there saying the same thing. In fact, there's two. If you like what I'm covering here, if it makes sense to you, share it with a friend, give somebody else peace of mind, help everyone in your circle of friends and your circle of professionals, understand what's happening to the U.S. credit score, what it actually means and what the headlines aren't really talking about. Because right now, the headlines are telling you that these decisions were somehow arbitrary or artificial or punitive. That's not the case. They were

actually well-coordinated, well-rationalized, and well-justified. And you can see it very clearly when you look at the historical reporting of what Fitch has said about the inability for our fiscal centers of government to cooperate and return good on credit. That's as fair as it gets. So I don't want you to be distracted. I don't want you to be angry and I don't want you to be misled by the headlines because that's exactly what they're doing right now because they're taking their talking points from the White House and from the Hill. And right now, the Hill and the White House are the ones having their hand slapped. They're the ones that should be embarrassed. Not you. If you learned something today, please share this with somebody. Leave a comment below. Give me a thumbs up. Let me know that

this was something that brought you value and this was something that brought you, hopefully, some peace of mind and some confidence, even if it's just confidence and peace of mind in knowing what to expect will happen next. Because for sure, I don't feel peace of mind or confidence in terms of the way our current policymakers are managing my money and yours. But we can keep working through that because at the end of the day, in the United States, we are the ones who choose the policymakers. All they get to choose is the policy. Take care.