What Does Really Matter?
Guest Post by Dennis Miller at Miller On The Money
Recently our friends at WHVP published an eye-opening article, The Swiss View: “It doesn’t really matter that much” discussing Fitch downgrading the US credit rating:
“Fitch announced that they downgraded the credit rating from the U.S. from AAA to AA+. ….(citing) the suspended debt ceiling and the high debt-to-GDP ratio.
…. While the announcement itself is already worrying, it is not comparable to the reactions that followed…packed with unreasonableness and arrogance.
…. Jamie Dimon, CEO of JPMorgan…stated that the downgrade is ‘ridiculous’ but that ‘it doesn’t really matter’ since the market, not rating agencies, determines borrowing costs. While this is not wrong per se,…understand that markets, to a certain extent, base their decisions on rating agencies.
…. The funny part about that is that back during the U.S. mortgage crisis, the same rating agencies were criticized that they adapted their ratings towards the wishes of the institutions they rated. Now, the U.S. is officially trying to influence this decision.
However, it is not only Jamie Dimon who felt frustrated. U.S. Secretary Janet Yellen commented on this decision as ‘surprising’ and ‘entirely unwarranted.’
From an outside perspective, it is surprising that such influential and educated people do not recognize (or admit) that the U.S. financial household is in trouble.”
I contacted Urs Vrijhof-Droese, Managing Partner of WHVP for further explanation. Urs, an expert in international banking is based in Zurich. I’m a WHVP client.
DENNIS: Urs, thanks again for taking your time for our readers’ benefit. Please clarify something for me.
When you quoted Dimon, “It doesn’t really matter” I came away with a different meaning. Were you implying the downgrade in rating, “doesn’t really matter” to the rest of the world either? Rating agencies notwithstanding, the world understands what is going on with US deficits and are taking that into consideration. Did I miss something?
Define “really”.