oddities, when it comes to iran for almost 200 years, americans have generally been stuck with 2 political choices, but cannot ever change because it comes to put us politics, the bottom line. i care about helping us engages with the rest of the world. we're really interested in taking you in to a flight. you might not visit otherwise, i feel as if you were there done grading the credit, right? single. think united states the white house lashes on. so what it calls the float assessment by speech ratings. but what's, what reading the financial experts, this will take us to call to be in trouble. this is inside story, the hello and welcome to the web. so he'll robin the credit score of the wills, biggest a call to be downgraded the rating agency,

fitch size it 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 tough 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 katia lopez hold on and it's not the assessment the us government was hoping for. but the reading agency searches 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 agree, let's say the downgrade hurts the us treasury's ego more than the economy. the way i've described it to our clients is that if i was apply with of an airplane and you

are the passenger, it's going to get very bump 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 what, which describes as an erosion of government, including contentious 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 reach a boiling point, and we all polarize where is polarized, as we've ever been. we will know that between the democrats, republicans, we can't seem to reach agreement on any thing. investors look at credit ratings to evaluate their own investments and assess risk. the us treasury secretary janet the ellen 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. katia a little bit with the young for insights story of the spring in august. william leads the chief of all the rest of the american non profit thing time. the milken institute. he's with us line from henderson in nevada, from china capital and the tongue of a senior southern, the beijing base piece and development thing. tongue thought he institutes. he's also a full moon investment bank and in rochester, in england, francisco economist and banking commentators, she read the book, the people's case,

quantitative easing. welcome to go, my guess. could tell you with us all this edition of inside story. we didn't consult with you in henderson, nevada, the impact the current situation is far reaching both domestically and internationally, short term and long term. how do you briefly assess the situation that the us is facing? well, the us treasury market is that the core and foundation of the, of the global financial system because every said is priced off of us treasury's so when such a lowers the rating of the us treasury, it implies that they have lost confidence or at the, or less confidence that the us government is able to contain of spending in a way that keeps the dead rising at the size, the speed of the g, d. p, or the, the us economy. when one of the worst thing is that can happen is if 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 fixes sell telling us that the government has not done the necessary measures to contain the growth of that debt francisco for the iraq. just it really is the shots across the bows. isn't that? yes, i think it is. i mean, um, i think the drivers to this actually has to be in the stretch of 2 folds. um close by the desk. so you should not because this is not the 1st time we have had the dress, a default on youtube lift. can you fly too fast? i, as i'm thinking since finance cost is actually just, i've done nothing. it probably is about time that so somebody said this will not do . you should not play chicken with world scribble system like this. finally, we'll talk the specifics of the chinese on goal during the program. but how does do you think beijing view what's going on in terms of the fiche downgrade?

well, i mean it's, yeah, 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 gibbs income in terms of spending. that means if you've got a salary of 800000, you are 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 that polarized everything that my fellow commentators have pointed out. so yes,

it's an obvious conclusion. what is only strange is that the other reading houses haven't joined it. when i just bring you back in here because of what i think what john that yelling is angry about is the size, the diesels of downgrades happened to countries that, that we say are developing. all said well to isolate, to the under sort of certain regimes. her feelings of being had been a professionalism, perhaps is also being tainted slightly with all of this. well, secretary yelling actually has focused as a discussion onto the subject that he can always. i, she's right to say the us is still the most powerful country in the world, and it is probably the most attractive place for investment money to come into the country. or every country in the world is sending their savings to the state because united states is the most productive country in the world. but such as telling us what's not the us economy, they're worried about. it's the us politics. the not confident that the government itself is both democrats and republicans, did i constantly,

they will be able to contain the growth of spending. and in this case is mainly entitled and spend the spending for, for social security, the 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 the state in the long run. well really, while you were talking and it was shaking his head in disagreements and francis certainly was noting a degree. but let's go back to i the 1st as to why you were shaking your head in disagreement as well. i love this idea that somehow you're so good cut education, social welfare in a country which has 10 point, one percent of 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 u. s. is, uh, 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 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 a brief sense to reply. yeah, always nothing about 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. i. so it is actually because of the dysfunctional politics it dots from the message is the hall to them. so that's the reason for the short term view and the focus on things that potentially don't mattress boxes, for example, empowering next generation education. i'm just guessing, i'm just doing something about demographic tumbling and just not able to deal with it because of all success. 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, when 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 where 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 your smoke are spending being the source of this problem. but you have smoke source, but it's only 3 percent of g t, p and 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 on. so the budget actually is taking care of the knows for 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 and 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, heart 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, you know, don't 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, one. and i've got a start of the ministry spending on those to a load 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 in the cost of living, which is affecting old americans and the public globally as well as well as you can do 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 engaged in, in last 20 years. and even before that time, and we should remember that the, the even going back into the novel 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 the every year all the time. that's spending axis, it's refuse. and i think it's somewhat the way i read fits and statements in some respects. it was the entrenched deficit because of the modem that looks like i'm just talking. let me just come back to this conversation on a little bit more, 2011 standards and polls downgraded to us at that time. that was kind of 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 golf home with it. and what's going on because at the end of the day is that 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. so 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 rating. so it's not really going to matter if for any reason, one of the other rating agencies downgrades that 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 absolute safety, we'll say, well, we need to rating agencies who say that this is triple a bond. if that doesn't things, then there are contracts. so, you know, people say, well, i can't buy those, i have to buy something else about norwegian bonds or something like us. so it definitely will make us a sense. but i just want to add 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 probably investigated by uh

uh, 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. so 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 trend doesn't change. and then on top of that more bar ring for wars and pandemic. and indeed, as long as it's not just about to you on the whole debate you that you, we talked about the politics, you know, pets of bite and as actually, even in fact that he thinks that the debt savings should go. so you can not see them against the constitution. this may be at the bates that will either 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, a more instability? because countries like china are watching out by you know, they all, and i'm not, i don't, it's increasing the last to the documents i visit that say about whether that should even be a debt saying, i mean, whether congress should be able to authorize spending. and then refuse to pay for it, which is roughly what's going on and all the things are the income or i sent you the you try, it looks ridiculous. that's embarrassing. and it doesn't lock anyways, right throughout the country and know that the big bias 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. so how long is that going to talk with that? how long will they put up with it? because one of the things i think william, 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 all debts they have to borrow. so how is this a go to effect the big multi nationals who are the computer firms, the airline industry, the construction funds, as well one consequence of the, the rating decision. and i, it's really has the knowledge with the markets of already seen for quite a while. that the us governance structure is the ability to contain spending is in question. and 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 is going to be a partner for them to raise money. it's gonna be hard for them to finance investment. but that's a consequence of this poor and government 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. busy 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 of the, uh, it's not about containing spending, it's about inflation, and that's why 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 curtailing 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 where they're, how the hospital or education have stored literally going up 1012 times. where is actual goods coming from? the rest of the world hasn't remain fairly steady, 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 tests for 10 years, inflation rates of less than 2 percent. and the global economy has been in this

reflection period. so. so the fact that he's, the inflation is brought up is really a non, it's like what is not relevant. what's relevant is that the us treasury has not been able to sell. it's bond at a low interest rate because the market so 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 surface. it is probably just spotted up and, and be able to contain the size depths. it is the main issue which jenny yelling, and every, all the secretary treasury has the best part about it every, every fed resort. sean has talked about that the us is on a non sustainable fiscal trajectory and would need to contain just the size of the deficit, both spending and vibration patches. like say you guys aren't going to agree on that. the told us about defrances in rochester because obviously it was that he was this week that we sold the bank of england, right? it's based interest rate. and i'm just wondering from 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 fiche rating. how does, how does raising bank rates in the u. k. a dealing with inflation relate to what's going on in the us because every countries try to deal with inflation of the inventory they globally or no, absolutely. um, inpatient. this is a physical problem. the question by come to not he was in the us about the boxes, i actually don't think is directly related to the slides and physical deficits. we have a sizable physical deficit because of a coverage under basic. and we have a lot in the else from office financial crisis and everybody was trying to be worried about 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 going to 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 depths at all. um, because what are 2 things that i've noticed on the screen? listen to that by some people like and then re, i'm for example, it stops the us kind of acts as consumer goals result the whole low. so if you go to whole was, well, lots and lots of countries to trying to put the extra time to for the export that good strategies build up foreign exchange reserves. someone has got to run a deficit and those countries, particularly automatically is commented on this. particularly over the last few years, hoppey us i'm you cannot guarantee because a accident as i was just the countries actually really have the biggest problem with inflation and assigning. and so i'll just come back to you because china has been pushing over several years to push the one and 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, the dollar is to establish them too strong and globally recognize as a reliable fund and the money to actually invest in. why is that perhaps dare i say the face? seen the one. 0 is that still working? progress? i go i, i think you mischaracterizing, i don't think that they lack faith that the, they're the ones you've been putting together the digital currency. they've been playing that out. doing it very slowly. they 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 you know, the reasons 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 see that people have

lost 4 percent of their real income due to inflation, europe, even more of 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's obviously some coming up with the brakes meeting that's coming up next. in the near future. they will be looking at a bricks, 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 the 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 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 it out, does not have its house in order. well it, it's certainly seems to be like that because we come into the, into the printer. we 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. francisco, i come to you because, you know, international relations relationship, the special relationship between the united kingdom of 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, deflation,

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 at large? as i mentioned, you know, some of them losing their homes. yeah. i think both countries are really probably recognize on they say the about the fact it's is trying to get information on the control. it's why is it not his is primary consideration, not on over to the secondary. the other mandate just unemployment and is there one on that? um, you know, it's not going to be concerned about what's going on. now the countries, assuming that the bank of england is responsibility is the domestic economy, i'll see you k and attorney type guides. and so far as the latest said to the extent that the bridge is kind of me, is affected by driving forces in particular by things like this, thanks for your top dollar and the cost of energy, which is costing jones. so it's, it's not when us leads you k follows with us, it's often called try it. it's very mobile that. and it said that does sufficient

dependents. spectrum in the us, new on the us. so let me just find one moment, then, sorry, it's a bit to parts and effects is welcome to the final comment william from you. i mean, it's just 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 that's why its courtesy is 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 that people remain confident that the us dollar can be used. what will see, what does happen? it's been great to speak to all 3 of you. thanks to me, i guess we're literally on the time in advance is coupler for joining me on this edition of inside story and thank you to as well. so watching you can see the program again any time by visiting our website at algebra dot com. and for further discussion, go to on facebook page. that's facebook dot com, forward slash ha inside story. you can also join the conversation on twitter handle

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