Billionaire venture capitalist Chamath Palihapitiya says that the latest downgrade of the country’s credit rating is not a cause for concern.
On August 1st, credit-rating agency Fitch downgraded the long-term ratings of the United States from “AAA” to “AA+” with a stable outlook.
Palihapitiya says that people should not pay attention to Fitch’s latest move as he believes the United States still boasts the most dominant economy in the world.
“Let me just state what I think about the downgrade is: it’s irrelevant.
The S&P (Global Ratings) did it 13 years ago. Fitch is a marginal credit-rating agency. They’re at a minimum 13 years late. At a maximum, they’re just anxiety-ridden…
The second point and the more important one is that none of you who are always freaking out about this understand this conversation about relativism. All of these conversations are relative, and you deal with them in absolutes. On a relative basis, Japan’s debt to GDP (gross domestic product) is 270% and growing. On a relative basis, our debt to GDP is half of that.
We are the most important economic force in the world. It is going to continue to be the most [important] economic force in the world, and all I see actually on every single monetary basis is every other country struggling more than we are.”
Palihapitiya also says that central banks around the world will be hard-pressed to find an alternative that could replace the US dollar in their foreign reserves.
“What do you do, if you’re a central government, where you have to have foreign reserves? Do you all of a sudden double down on the euro? Do you double down on the yuan, which is basically a proxy for doubling down on the US dollar…?
On a relative basis, the US will still continue to do well. I think that debt to GDP is a red herring for a lot of people.”
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