{"id":12175,"date":"2025-05-18T02:01:05","date_gmt":"2025-05-18T00:01:05","guid":{"rendered":"https:\/\/wsj-crypto.com\/?p=12175"},"modified":"2025-05-18T02:01:05","modified_gmt":"2025-05-18T00:01:05","slug":"moodys-lowers-us-credit-rating-amid-growing-debt-concerns","status":"publish","type":"post","link":"https:\/\/wsj-crypto.com\/index.php\/2025\/05\/18\/moodys-lowers-us-credit-rating-amid-growing-debt-concerns\/","title":{"rendered":"Moody’s Lowers US Credit Rating Amid Growing Debt Concerns"},"content":{"rendered":"

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Moody’s credit rating firm downgraded the credit rating of the United States government from Aaa to Aa1, attributing the increase in national debt as the main factor behind the decline in credit quality.<\/p>\n

In a May 16 declaration<\/a> from the agency, US lawmakers have not managed to curb annual deficits or diminish expenditures over the years, resulting in a rising national debt<\/a>. The agency noted:<\/p>\n

“We do not anticipate substantial multi-year cuts in mandatory spending and deficits from the current fiscal proposals being evaluated. Over the next decade, we foresee larger deficits as entitlement spending grows while government income remains largely stagnant.”<\/p><\/blockquote>\n

The credit downgrade is merely one step out of the 21-notch rating scale deployed by the firm to evaluate the credit health of an entity.<\/p>\n

A summary of the US national debt. Source: <\/em>US National Debt Clock<\/em><\/a><\/figcaption><\/figure>\n

Despite the unfavorable short to medium-term credit perspective, Moody’s upheld a favorable outlook on the long-term stability of the United States, citing its strong economy and the position of the US dollar as the global reserve currency<\/a> as advantages, indicating “balanced” lending risks.<\/p>\n

Related: <\/strong><\/em>Asia\u2019s affluent transferring from US dollar to cryptocurrencies, gold, China: UBS<\/strong><\/em><\/a><\/p>\n

Investor responses to Moody’s US credit adjustment <\/h2>\n

Moody’s declaration elicited mixed responses from investors and market participants, leaving many skeptical of the agency’s revised view.<\/p>\n

Gabor Gurbacs, CEO and founder of crypto loyalty rewards firm Pointsville, referenced the agency’s past credit assessments during periods of financial turmoil as unreliable, indicating that the outlook was overly optimistic.<\/p>\n

“This is the same Moody\u2019s that awarded Aaa ratings to sub-prime mortgage-backed securities that contributed to the 2007-2008 financial crisis,” the executive stated in a May 17 X post<\/a>.<\/p>\n

Conversely, macroeconomic investor Jim Bianco contended that the recent Moody’s credit perspective does not signify a genuine downgrade in the perception of US government credit quality and characterized<\/a> the announcement as a “non-event.”<\/p>\n

\"Economy,
Interest rates on the 30-year US Treasury Bond surged to nearly 5% in May 2025, indicating diminished long-term investor trust in US debt. Source: <\/em>TradingView<\/em><\/a><\/figcaption><\/figure>\n

US government debt exceeded $36 trillion in January 2025 and shows no signs of abating, despite recent attempts by Elon Musk and others to curtail federal expenditure<\/a> and mitigate the national debt.<\/p>\n

As the debt escalates and investors lose confidence in US government securities, bond yields will rise, driving debt service payments up, further swelling the national debt.<\/p>\n

This initiates a vicious cycle as the government will need to attract investors with increasingly higher yields to motivate them to acquire government debt.<\/p>\n

Magazine: <\/strong><\/em>Elon Musk\u2019s proposal to govern via blockchain faces significant challenges<\/strong><\/em><\/a><\/p>\n