basically, entities, the un fits of purpose was like many critics sites, just pump solutions doesn't get anywhere near enough done to the amount of money that is put into a hard hitting interviews. you think about to the lines of washington enough for body to go on its own and built it's on thoughts providing on for centuries, people have been taken care of are. so i have every confidence that future generations will do it as well via the story on told to how does era done grading the credit, right, single figured nights it states the white house lashes up to what he calls the float assessment by fits ratings. what's what? reading the financial experts, this will take us to come to be in trouble. this is inside story, the

hello and welcome to the fact that loves the whole robin. the credit score of the world's biggest a call to be downgraded. the rating agency fits says that evaluated several factors before lowering america's school from aaa to double a plus. but the core of the issue is spending, which many se is out of control. political divisions also weighed heavily, so will this downgrade sway investors? what impact will it have in washington? yeah. before the next to us presidential election, we'll get to those issues with all guess in a moment that says this report by category lopez hold on and it's not the assessments the us government was hoping for. but the reading agency, such as defending this decision to downgrade america's credit score from triple 8 to double 8 plus it says washington has a major spending problem. it hasn't managed to control. most analysts agreed,

let's say the downgrade hurts the us treasury ego. more than the economy, the way i've described it to our clients is that if i was a pilot of an airplane and you are the passenger, it's going to get very bumped be put on your seat belt, but the airplane is not going to crash. we're still going to get to our destination, which i think will be higher than it is today, both the s and p and the del majority. leaders are the reasons for the downgrade, include, which, which describes as an erosion of government, including consensus last minute, congressional debates in june over the $32.00 trillion dollar debts. the attack on the capital 2 years ago didn't help with any sliding between democrats and republicans. brewing for years, analysts say, is now reached a boiling point, and we are polarized, where is polarized as we've ever been. we all know that between the democrats, republicans, we can't seem to reach agreement on anything. investors look at credit ratings to

evaluate their own investments and assess risk. the us treasury secretary janet deal and launched this attack, which is decision is puzzling in light of the economic strength we see in the united states. i strongly disagree with fits his decision, and i believe it is entirely unwarranted. while a double a plus credit score is still considered very good, summit investors say that sound great inevitably leaves the financial tent, particularly ahead of the us presidential election next year. a cod see a little bit of the yan for insights story. the spring in august, william leads the chief of all the rest of the american non profit thing tank. the milk and institute cheese with us live from henderson in nevada, from china capital and the tongue of a senior fellow at the beijing base piece and development thing. tank thought he

institutes, he's also a full moon investment bank, and in rochester, in england, francisco for an economist and thinking commentators she read the book, the people's case for quantitative easing. welcome to all my guess kentucky with us . all this edition of inside story, we didn't consult with you and had to send of all the, the impact the current situation as far reaching both domestically and internationally, short term and long term. how do you briefly assess the situation that the us is facing? what the us treasury market is at the core and foundation of the, of the global financial system because every said is priced off of us treasury's so when the federal lowers the rating of the us treasury, it implies that they have lost confidence or how or less confident that the us government is able to contain that spending in a way that keeps the dead rising at the size, the speed of the g, d, p or the, the us economy. one. the one of the worst things that can happen is if the spending

gets out of control and the size of the debt starts to grow faster than the us economy itself is growing. because that implies the us will be less able to pay the outstanding debt. and right now the, the, the, the government is uh, in a position where it can do something about it. but so far fits yourself, telling us that the government has not done the necessary measures to contain the growth of that debt francisco for a lot just it really is a shelter across the miles. isn't that? yes, i think it is orange. um i think so. you driving to this actually has to be in the stretch of defaults. um closed by the just so you should not because this is not the 1st time we have had the dress, a default on youtube. lets can invite you to the 5 sites i think. and since finance cost is actually decide time, and i think it probably is about time that so somebody said this will not do. you should not play chicken with road scope a system like this. finally,

we'll talk the specifics of the chinese on goal during the program. but how to is do you think beijing view what's going on in terms of the fiche downgrade? well, i mean it's, i don't think it's particular to beijing, you've just heard your commentators. uh, you know, very carefully spell it out of the us. if it was not the united states, it would be a ponzi scheme. think of it this way, since 2001, the u. s. has been exceeding, gets income in terms of spending. that means if you've had a salary of 800000, you're spending more than 800000 since 2009 in addition to going to deficit on a yearly basis. since 2009, they borrowed additional money and that is increased the debt. so the u. s. as in a position now where it's borrowing to pay gets that interest. that's interest on the money. it's already borrowed with no end in sight, as we saw with the,

you know, taking the can down the road. it's really about there is no solution at polarized everything that my uh, the commentators are pointed out. so yes, it's an obvious conclusion where it is only strange is that the other reading houses kind of joined it. when i just bring you back in here because of what i think what john, that yelling is so angry about is the size, the diesels of down grades happen to countries that, that we say are developing. all said, well to isolate, to the under sort of certain regimes. her feelings have been, had been that professionalism perhaps has also been tainted slightly with all of this or well, secretary yelling actually has focused as a discussion onto the subject that he can always change, right. to say the us is still the most powerful country in the world and is, is probably the most attractive place for investment money to come into the country on every country. and the world is sending those. busy we started phase because united states is the most productive country in the world, but such is telling us,

well, it's not the us economy. the worried about is the us politics. the not confident that the government itself is both democrats and republicans, did i content that they will be able to contain the growth of spending. and this case is mainly entitled and spend the spending for, for social security, this health care, which are the main drivers for the rise and spending that the somehow the fits just telling everyone you know, us government is not able to either raise taxes or contain spending in a way that makes us confidence the us government will be able to pay off instead in the long run. well really, while you were talking and it was shaking his head in disagreement and francis certainly was nothing in agree with. let's go back to either this as to why you were shaking your head in disagreement. well, i love this idea that somehow use a good type education, social welfare in a country which has 10 point one percent of the poverty already. if people get droves of people going as a streets, you have a economy which is pushing

a lot of people to the default on their homes. meanwhile, the unlimited spending is going to the military and largest military budget ever. the military was exempted from any kind of decrease. so you know, this, this idea that the us is, you know, somehow doing, uh, the right thing here is kind of ridiculous. the us has pursued a path of financial irresponsibility. i'm not saying that from beijing's point of view, how else can you explain it? we've exceeded our g d p in terms of our national debt. we're 2nd in the world behind a japan which is around $240.00 to $50.00. depending on which day you're measuring it, that's times 250 to 40 percent above their g d p. so we're in a rarefied error where our strength, yes, we have strength, there is growth, but it's not the kind of growth nor is there a solution to this that francis you a, i mean you've had both sides of it now and you know, you know,

thinking agreement with william before i just bring it in for $0.03, a reply. yeah, i was nothing about the politics because i do think this is a political issue. that the reason why the us contract control is spending. i'm calling direct it into the most socially effective and productive areas. and so it is actually because of the dysfunctional politics it dots from demetrius is the hall to the massa. that's the reason for the short term view and the focus on things that potentially doesn't mattress boxes, for example, empowering next generation education. i'm just getting, i'm just doing something about demographic tumbling, just not able to deal with it because of all 60, so dysfunctional and they do, we talk about the politics. let's go back to william because, you know, we're talking about a divided government. so i'd certainly divided us political stance is, you know, it comes to the debt ceiling. we had so much about it every time either when the republicans wants to raise it, or when the democrats wants to raise it. heated debates,

real worries about why government services will stop really and this happened, you know, it happens time and time again. they just can't seem to find middle ground politics . it's got very personal. absolutely. insight in the united states paul takes, has become a so dysfunctional as, as of this couple of says that the us is not able to decide on priorities. and unfortunately, i know how does a great narrative about the size of us notes are spending being the source of this problem. but you know, it's no source, but it's only 3 percent of g p, a 12 percent of the us budget. so military spending is actually schedule to, to, to shrink as a, as a share of gdp going forward. so the budget actually is taking care of the military spending. it's really the, the social spending of for health care. and it's not so much the amount of spending is the cost of health care, which the us has never been able to get a handle on going back to president clinton and his attempts to,

to modify the reform health care. so. so for the united states, it really is a problem of costs going all out of hand and the us government not having the capability of making decisions hard decisions on how to contain costs of health care. let me bring you front 6. i think we need a little bit of neutrality here, and you talked about the politics, frances, you keep to o'clock the minutes and i don't wanna get too bogged down about the military. but the fitch statement did talk about governments over the last 20 years . and within the last 20 years, we have 2 major military complex, one in iraq want enough kind of style of the military spending on those 2 alone has gone into the billions. that is a debt that the american government has to try and pay back, because they borrowed money on that. this is actually exacerbating the problem that we're seeing now post pandemic. and now the, the rise and the cost of living, which is affecting old americans and the public globally as well as well as you can, you to distinguish between 2 things. one is deposition, the other is the desk of us how high levels of started. that's funny because it was

that it's, it guys didn't in last 20 years. and even before that's, i mean we should remember that the, the even going back into the, the whole has left it with legacy that unplugged the data on this high anyway. but then on top of that, we have an entrenched deficit. you know, it was that every year, all the time, it's spending axis, it's refuse. and i think it's from what the way i read fits his statement. in some respects it was the entrenched deficit because of the modem that looks like i'm just talking. let me just about to have this conversation on a little bit more. 2011 at sundance impulse downgraded the us at that time. that was probably a little bit banks moved to you might say a both struck the financial community. this time, this being the public, this be no major moves. everybody's just goes home with it and what's going on because at the end of the day, is that the china and japan a by

a boost of america's death. and i really happy to do that because again, the whole scenario about the strength of the dollar as well to like the big 4 accounting firms, they're a big 3 in terms of rating agencies and 2 of them have to maintain their triple a ratings rates. so it's not really going to matter if for any reason, one of the other rating agencies downgrades us, then it starts to matter because man, it's a say don't a lot of contracts require that it least 2 rating agencies rate a bond at a certain level. if it's the, you know, somebody wants absolutely the safety will say, well, we need to rating agencies who say that this is triple a bonds. if that doesn't things, then there are contracts. so, you know, people say, well, you can't buy those. i have to buy something else about norwegian bonds or something like us, so it will make us a sense, but i just want to out a little interesting note. 2 weeks after s and p lower their rating,

they were investigated for fraud. the following year in 2012, a group named evans, which is a smaller rating house, did the same thing. they downgraded twice and they were promptly investigated by the, by the f. b i are. and once again, under some sort of uh, fraud, terry, they did several it in the end, but it was not a very happy circumstance. it so you know, i, i wonder if judges what is going to be punished by them. now i disagree with this idea that, you know, the, the treasury secretary yelling, who use big font, she's somebody who follows the data. i think she's just putting on a show. i mean, she has to be worried about these. yeah, you know, yearly deficits is my colleague is pointed out, it's in french, it doesn't change. and then on top of that more bar ring for wars and pandemic, and indeed the sounds that sounds just come out to you on the whole debate. you said you, we talked about the politics, you know, because of bite and as actually, even in fact that he thinks that the debt savings should go is even pops even

against the constitution. but this may be at the bates that will even head towards the presidential election will may be resolved when the next president is elected. but you need to bypass this on the approach that you want these things. so can we expect more bickering, more instability because countries like china are watching out by you know, they all, and i'm not, i don't, was increasing the last to the documents i visit that say about whether that should even be in that setting. i mean, whether congress should be able to authorize spending and then refuse to pay for it, which is roughly what's going on. it all seems like the ink tomorrow i sent you the okay. it looks ridiculous. that's embarrassing. and it doesn't lock anyways, right? throughout the country and know that the big bias of american debt would be looking at those. i'm saying we want to trust the american savings products that we buy. so us treasury's of us or have you, we want to, to trust the dollar. and this,

this stuff going on in america which hung to minds facing those things. how long are they going for talk with that? how long will they put up with it? because one of the things i think will be in the many big business that certainly in, in the us will be wondering, is whether we all seen as reliable because obviously big companies also have to take hold that they have to borrow. so how is this a go to effect the big multi nationals who are the computer systems, the airline industry, the construction funds, as well one consequence of the, the rating decisions and i, it's really has the knowledge what the markets of already seen for quite a while that the us governance structure is the ability to contain spending is in question as a result, us treasury, so now having to pay higher interest rates to compensate for that higher risk. so what's gonna happen is that for us companies, it's going to be harder for them to raise money. it's gonna be hard for them to finance investment. but that's a consequence of this poor and governance structure of the country in which they

operate. and i think that's something that most companies have learned to, to live with, and the knowledge that they'll be a higher cost. now, for those who are holders of the us treasury, they'll be compensated with higher interest payments. so again, i think the markets will work itself out in terms of repricing, us treasures in a way that makes people confidence and be able to hold us treasures as a source of savings in terms of i'm trying to understand the market. so you, shaking your head on the let's, let's see what you want to say. oh i, i am so harsh. i completely disagree with my colleagues. first off. uh the, uh, it's not about containing spending is about inflation and that's what the fed has been increasing rates as they've increase the rates. that means people who bought before then they've seen the value of the treasury, is they bought plummet. that's why we've had issues like silicon valley bank going under as well as others. so there's, i don't even know where you're coming up with this idea that this is somehow about

the impossibility of for tailoring social spending is the problem. the problem is that the u. s. is less competitive. if you look at inflation and been in terms of wages and where it's going. you'll note that it services with in the us, whether have a hospital or education have stored literally going up 1012 times. where is actual goods coming from the rest of the world. i remain fairly steady, even in some cases even gone down. so the inflation that the u. s. is facing, is of its own making. i'd say is a highly, it's a service economy. and when those wages go up, it's not like, uh, putting the interest rates higher by the fed is going to make people feel less sick or decide they don't need an education. but really i'm going to ask you to come back and you wish like you had through all of that. yes, absolutely. i mean, that's a non secular, that's of all you has just talked about because inflation is a global problem that resulted from the supply problems caused by the cold it and

also the war between russia and ukraine. we see that before they called it us tied for 10 years, inflation rates of less than 2 percent and the global economy has been in addition to fortune period. so. so the fact that he's been flashing his product, this is really an honest like what does not relevant, what's relevant is that the us treasury has not been able to sell its bond at a low interest rate because the markets are slowly losing confidence that they'll be able to get back the same value that they put in. uh so, so i think this is a long term problem that has to do with the size of the stuff instead of sponsored . just spelt it up and, and be able to contain to size depths. that is the main issue which jenny, young and every other secretary treasury has just talked about that every, every fed resort. john has talked about that the us is on a non sustainable fiscal trajectory. and we need to contain this and the size of the deficit, both spending and vibration patches. but like i said, you guys aren't going to agree on that. the toner is about to francis. i even wrote just that because obviously it was that what this week that we saw at the bank of

england, right, it's based interest rate. and i'm just wondering for where you'll positioned in the united kingdom, how, you know, the bank of england watches, what's going on in america understands the spending issues under the debt ceiling and why the treasury is so angry at the fits rating. how does, how does raising bank rates in the u. k. and dealing with inflation relate to what's going on in the us cuz every countries tried to deal with inflation of somebody mentally gladly. no, absolutely. um, inpatient is, is a physical problem. the question by come to not he was in the us of the moment, i actually don't think is directly related to the slides and physical data says we have a sizable physical that is long because of a carpet kind of like we have a lot in the all small has financial crisis and i think what it was, charles, we've already bought physical debt and deficit since and everything was gonna go to here on it. and i'm wary about raising those as to

a particular purpose. i'm, i'm, and i'm getting because i think some of the policies i've followed up that time. where are you currently be damaging? what i would rather focus on? i think he's actually looking at this from a collateral perspective to see what that meant. what the drive is with the american dentist at all. um, because what are 2 things that i've noticed on his fingers and developed by some people like and then re, um, for example, it stops the us kind of acts as consumer goals result the whole low. so if you go to whole loads with lots and lots of countries to trying to pick the extra time to for export, that good strategies and build up foreign exchange is us. someone has got to run the deficit and those countries, particularly the automatic, has commented on this particular over the last few years. happy us. i'm you cannot guarantee because i accidentally services the countries actually really have the biggest problem is inflation and assigning. and so i'll just come back to you

because china has been pushing over several years to push the one as an alternative to the dollar. it's made no secret in that respect, but, but it's backed off recently. what's going on that is it because the dollar has to established and too strong and globally recognize as a reliable fund and the money to actually invest stain. why is that perhaps dare i say the face? seen the one. 0 is that still working? progress to go, i think you miss eric utilizing i don't think that they lack faith that the they're the ones who have been putting together the digital currency. they've been playing that out. doing it very slowly. the want to make sure that it works. they are also doing currency spots with a lot of the nations that they are doing business with. remember, china has a lot of over a 100 almost 120 nations where it is the primary trade contributor, one way of good in terms of both way trade. but yeah, this, these things i,

i don't understand where my colleagues are coming from. i would really like them to tell what they just said to the man on the street and us they, if you can, people have lost 4 percent of their real income due to inflation. europe, even more great britain as well. saying that inflation somehow doesn't matter. i, i find that highly strange given that the us is focused on it, that it's raising rates and forcing other countries to do exactly the same in terms of china. but it's not letting off, but this is a time of great uncertainty. this is not the time to push forward. there is obviously some coming up at the break speeding that's coming up next. in the near future, they will be looking at a briggs currency. i don't know how far that's going to go, but it's not about replacing the dollar. the us violated the terms of its own agreement, not to web an ice swift system that settles a bank accounts on

a daily basis. so everything can square out it has to be very, very secure because you have so many transactions. and it was us to said they would never do that. they would never weaponized it. and then did us as i routinely now using it as a weapon against any country, a dozen of you as the following is criteria. and that includes a lot of countries right now. and so at this juncture, you know, you, you, you have a situation where a china is trying to be an adult in the room. and the us, as my colleagues at point did out, does not have his house in order. well, it's certainly seems to be like that because we're coming to the end of the problem . just wanna get francis's opinion on williams. because really, if we move to something, we come to to huge general elections in the united kingdom and in the us in 2024. francis could i come to you because, you know, international relations, a relationship, a special relationship between the united kingdom and america is a,

one of those things that they can never be broken yet. both administrations don't always quite c, i to why, but when it comes to finances, inflation are they working together? how do you assess the way that tried to conduct a deal with inflation and the problems that the general public has largest item mentioned? you know, some of them losing their homes. yeah, i think both countries are really puzzling record is on. they say the about the fact it's is trying to catch reflection on the control. it's why and it's, it's obvious. it's finally concentration, not on over to the secondary, the other mandate just unemployment and it's doing well. now, i know it's not going to be concerned about what's going on. now the countries assuming the bank of england responsibility is the domestic economy. also your k attorney type guide and so far the latest fed to the extent that the creatures come to me is affected by driving forces in particular by things like the strength, nutone dollar and the cost of energy which is costing jones. so it's,

it's not when you estimated, so you k follows with us itself in full trade. it's very mold that is that sufficient and dependent spectrum in the us, new on the us. so let me just get the final comment, then, sorry, it's a bit of a button that says welcome to the funnel coming william from you. i mean, is this going to be a huge issue as we lean towards the presidential election now? absolutely, and the use us remains the most powerful country in the world. that's why it's courtesies being used for every transaction around the world and the us government and politics going forward is going to have to ensure that the us position is, is, is continues to be the most popular country. and the people remain confident that us dollar can be used. what we'll see, what does happen, it's been great to speak to all 3 of you. thanks to me, i guess when you get really on the time in advance is coupler for joining me on this edition. of inside story and thank you to as well for watching. you can see

the program again any time by visiting our website at algebra dot comments. if the discussion go to on facebook page, facebook dot com forward slash ha inside story. you can also join the conversation on twitter handle that is as a inside story for me. so robin and the whole inside story say, thanks for your time. and your company, the the after 300 years of danish colonization green, those results are attracting international interest. but the young generation is

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