Moody’s US Downgrade AAA to AA1

Armstrong Economics ^ | 20 May 25 | Martin Armstrong

[delta7]

Moody’s Investor Service downgraded the United States’ credit rating from a top-tier rating of AAA to AA1 due to rising government debt. Fitch Ratings lowered the US debt in August 2023 for the same reason in August 2023, and while Moody’s did not officially act at the time the agency warned that the US was at risk of a downgrade.

The United States has enjoyed AAA status since 1917—this downgrade is a dire warning. At the current trajectory, the $36 trillion+ deficit is expected to advance from 5.4% of GDP in 2024 to around 9% by 2035. Moody’s believes the United States still offers “exceptional credit strengths,” but debt and payment ratios are now “considerably higher than those of similarly rated sovereign entities.” The agency also cited political instability as a concern, as Republicans and Democrats have been unable to align on methods to meaningfully reduce the deficit.

Treasuries rose following Friday’s downgrade, with the 30-year rising above 5% and the 10-year reaching 4.54%. Investors see a larger risk in government debt and are demanding increased compensation for holding it.

America no longer has the “gold standard” symbolic rating that for years signaled to investors that the US was the safest place to park reserves. This could be a hit to overall confidence, yet there is no better alternative than the US. Increased borrowing costs will only cause the deficit to rise.

The government pays an astronomical fee to simply service its debt, with projections from the Congressional Budget Office for 2025 slated to be $952 billion. The US has already paid out $579 billion in the first seven months of FY2025 simply for the burden of holding such an asinine amount of debt. Debt servicing costs are expected to surpass the $1 trillion mark by 2026, with total interest payments over the next decade rising to $13.8 trillion.

[TexasGator]

“Watch closely, one of Trump’s son is promoting Bitcoin, the other Gold. Something is up, and I trust President Trump has a plan.”

Last year’s news ...

[MotorCityBuck]

Correct.
Stevie Wonders saw this coming.
This was also announced last week. No affect on the DOW yesterday.
Still waiting for the Sky to Fall.😂
Trump 🇺🇸👍

[kawhill]

As long as I get my SS direct deposit next month.

[delta7]

It is indeed. It might have been averted if…
————
What makes this significant is all three major Credit agencies have now downgraded US debt instruments…a first.

[MrRelevant]

What took so long? Looks more like political propaganda

[TexasGator]

“What makes this significant is all three major Credit agencies have now downgraded US debt instruments…a first.”

And Socrates missed it.

[ckilmer]

Trump brought the gulf Arabs into the the fold. Without them bricks is nothing

[mass55th]

When you have nothing to begin with, you have nothing to lose. That’s me.

[Recovering_Democrat]

why do you say that, Nate?

[nathanbedford]

why do you say that, Nate?

Because politicians with real histories of opposition to federal spending were excoriated for frustrating Trump.

When the details of the big beautiful bill began to emerge many contributors in this forum became concerned about the continued excessive spending in this bill. The tide changed somewhat.

For the record I entirely support Trump in his efforts to spare the nation a sovereign debt meltdown. I acknowledge the critical necessity of passing this bill, but I deplore the chronic reflexive condemnation of someone espousing ideas that even smell like being contrary to Trump dogma.

[Recovering_Democrat]

fair points. thanks.