Digest: What the U.S. Credit Rating Downgrade Means for You and Me 

Plus, Why Americans Are Flocking to Europe…

Welcome to the digest… my breakdown of the things we’re thinking about and talking about in the Global Intelligence world. 

First up, Uncle Sam’s falling credit score… 

Earlier this week, Fitch downgraded the U.S. government’s credit rating to AA+ from the top-rated AAA.  

Its reasoning? An “expected fiscal deterioration over the next three years,” plus an erosion of governance and a growing general debt burden.  

This is exactly what I’ve been warning about… 

For decades, politicians in Washington have borrowed and spent without thought to the long-term implications. Now, U.S. debt levels are spiraling out of control. As Fitch noted, the U.S. government deficit is expected to rise to 6.3% of GDP in 2023, a huge jump from 3.7% last year. 

Moreover, even as they borrow and spend, politicians remain more focused on partisan point-scoring than the long-term health of the U.S. economy.  

Debt aside, the other major reason for this downgrade was the battle over the debt ceiling earlier this year. 

Political fights over the debt ceiling have become a regular occurrence in Washington over the past decade. While Congress came to a compromise in early June when it passed legislation amending the government’s borrowing limit, the debt limit was only raised for roughly two years… meaning the problem was once again kicked down the road. 

Fitch has clearly seen enough. “The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management,” the agency said. 

This downgrade of the U.S. credit rating—the first by a major ratings firm in more than a decade—spells trouble for the $25 trillion global market for Treasurys. 

As the issuer of the world’s reserve currency, it’s unacceptable for the U.S. to not have a bulletproof credit rating. After all, U.S. Treasury bonds are supposed to be the ultimate safe-haven investment.  

But now, foreign central banks and ratings agencies like Fitch are waking up to how perilous Uncle Sam’s finances are…  

As Fitch noted, America’s financial situation will deteriorate over the next three years as debt levels continue to skyrocket and debt repayments rise along with interest rates. If Uncle Sam doesn’t get his economic house in order fast (and frankly there’s no way it does, given the incompetence of our congressional leaders), we will see a major global realignment away from the dollar… 

Which means now is the time to diversify some of your wealth into non-dollar assets like gold, bitcoin, and safe-haven currencies such as the Swiss franc. 

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Next up, Poland’s central bank is loading up on gold… 

Much has been said recently across the financial media of China’s and Singapore’s gold buying. Asian central banks loading up on physical gold isn’t exactly news. But Poland—which is part of the European Union and a U.S. ally—jumping headfirst into gold should serve as a warning sign… 

In the second quarter, Poland’s central bank officially became the world’s biggest buyer of gold—accumulating a massive 48.52 tons across April, May, and June this year. It also plans to buy another 50 tons over the next few months.  

Poland hadn’t bought gold for its reserves in four years. But after this recent spate of buying, it now holds 277.14 tons of gold—9.4% of its total reserve assets.  

The important point to understand is that this is part of a wider trend. Last year, global central banks bought the most gold since records began in 1950. 

Clearly, the world’s central banks see what’s happening… 

Like Fitch, they recognize that U.S. Treasurys are no longer the ultra-secure investment they once were… and are parking more of their wealth in gold instead as an insurance plan.  

And frankly, if central bankers are turning to gold, you should, too. (Check out our Global Intelligence Portfolio for my recommended gold investments.)

In the monetary realignment to come, gold will shoot the moon. 

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Finally this week, the mainstream media is finally catching wind of Americans flocking to Europe… 

According to a new report, the number of homes bought in Spain by Americans increased by 88% between 2019 and 2021. Meanwhile, the number of American expats living in Spain jumped by 13% during the same period.  

As life in America becomes more unaffordable by the day—with rents and healthcare prices skyrocketing in recent years—many Americans from all over the country are seeking a better quality of life in Europe.  

Though some of the top cities in Spain—Madrid, Valencia, and Barcelona—aren’t exactly the cheapest, they’re still miles more affordable than similar urban centers in the U.S. And when you look outside Spain’s major cities, life there is shockingly inexpensive. 

This American expat phenomenon isn’t just confined to Spain, of course. Destinations all over Europe—Portugal especially—are seeing an increase in American expats. 

In 2021, the number of Americans living in Portugal rose 45% from the previous year, according to government data. And in a recent study by the Portuguese Migration Observatory in December 2022, foreigners with residence permits in Portugal nearly reached 700,000—6.8% of the country’s population. 

When new numbers are released, they can happily add me to that list. I just completed my move from Prague to Cascais, Portugal. It’s affordable, beautiful, and my quality of life is outstanding… all for a fraction of the cost I’d pay for a similar place in America.   

If you’re interested in joining the growing numbers of Americans exploring a higher-quality, more affordable life in Europe, join me this fall at International Living’s Ultimate Go Overseas Bootcamp. We’ll show you how easy and fast it can be to make the move. (Sign up here to receive a special discount).  

That brings us to the end of this week’s digest. Many thanks for being a subscriber. And if you have any feedback or questions, reach out through the contact form on the Global Intelligence website. 

Enjoy the rest of your Sunday.