I don’t understand the role of Fitch on a global scale. I’ve never previously heard of the US or other countries having a credit rating. How does Fitch “have power” over the credit rating of entire countries.
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Fitch doesn’t necessarily have any direct power, instead, they process financial data and come up with a recommendation. Other countries, banks and investors trust this recommendation, which is why this rating is important.
Getting the AAA rating is basically them saying “If you lend the USA money, you will get at least what you agreed to back, if not more and it will be paid on time and in full. Your money is safe and your return is guaranteed.”. This means other central banks, investment firms and even individuals (through bonds) are willing to lend them lots of money and will accept a lower interest rate, because that money is basically guaranteed to be paid in full, with at least the stated interest (sometimes it pays more) on the date it is supposed to be paid.
AA+ is “You’ll get paid in full, but it might be a little late”. It is still a safe investment, but when it comes to the big bucks borrowing that happens at a national level, lenders may be looking for a higher interest rate because it isn’t AS guaranteed as AAA ratings. It also cuts down on lending options, because some organizations and nations will only lend to AAA rated countries. It shifts some of the bargaining power away from the US and definitely increases borrowing costs, but it isn’t the sort of thing that will collapse the financial system. It’s a mild to moderate annoyance for the most part.
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