The pristine universe of triple-A rated countries got a whole lot smaller this week after the U.S. was stripped of its top-tier rating.
It’s the latest example of a decadelong trend in developed economies as worries about high and rising debt burdens come to the fore. After Fitch Ratings cut the U.S. to AA+, the firm said its ranks of AAA rated nations are down to 9, making up just 6% of government debt globally — from 41% before.
To be clear, there’s nothing particularly new about Fitch’s downgrade. Brinkmanship over America’s borrowing authority, aka the debt ceiling, has turned into something of an embarrassing hallmark of U.S. politics. And demand for Treasuries, the world’s de facto risk-free asset and global benchmark for borrowing costs, is unlikely to vanish despite ballooning U.S. deficits. (Then, there’s the whole other argument that ratings are largely irrelevant.)