The Wednesday Letter #194

THIS WEEK: Moody's Downgrade; Global Intifada; Oil Market; Detroit and Georgism; Biden-Xi Meeting.

MOODY'S DOWNGRADE

Moody's is the last of the three major credit rating agencies to lower its view of US sovereign debt. Moody's cut its outlook from stable to negative, a less severe action than those taken by its peers. Standard & Poor's had shocked with its rating downgrade in 2011 and Fitch announced its own rating downgrade last August. The latest from Moody's was met with a loud yawn by both stock and bond markets. This reaction does not necessarily mean that the downgrade is unimportant. It only means that the market thinks it is unimportant. But there have been periods in the past when a prevailing narrative was so strong that it took many shocks to affect the general complacency. We are now at such a time, in a town called "Hyper Liquidity" at the intersection of "Artificial Intelligence (AI) will save us from everything" and "federal deficits don't matter". Should one of these two beliefs prove too optimistic (or premature in the case of AI), the stock market will suddenly loo…