, Cointelegraph analyst and writer Marcel Pechman explores the United States debt downgrade by Fitch Ratings. According to Pechman, this change signaled diminished confidence in the U.S. government’s ability to handle its fiscal responsibilities.
Interestingly, the cost of insuring U.S. sovereign debt against default — as indicated by credit default swaps — has largely remained stable post-downgrade. According to Pechman, a potential reason is that U.S. Treasurys are considered one of the safest investments globally because the U.S. government backs them.
Pechman believes that those models cannot calculate what happens to liquidity, or more specifically, the order book depth. For instance, what are the consequences if the U.S. government withholds the yield of its debt held by China?