Photo: 416style, Flickr
At this point, anyone who thinks that there won’t be any consequences to a debt ceiling failure are insane, if only due to the regulatory/ratings hit.FITCH is the latest to warn that if America doesn’t raise its debt ceiling by August 2 — the date Geithner has called a drop dead — then the US would be put on ratings watch negative.
This wouldn’t be a downgrade straight up, but it would be a precursor to one. Presumably if there were an actual technical default, the downgrades would be swift (though we think the actual real world ramifications of the world’s “safe-haven” creditor not paying its coupons would be far more dramatic).
The trifecta of ratings agencies have now weighed in with negative comments on US credit in recent months.
Moody’s made a similar warning to Fitch earlier this month.
S&P made a broader warning not related to the debt ceiling.
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