Source: Cointelegraph
Original: “Moody's Downgrades US Credit Rating Due to Rising Debt”
Moody's credit rating agency has downgraded the US government's credit rating from Aaa to Aa1, citing the rising national debt as the primary reason for the downgrade.
According to the announcement released by the agency on May 16, 2025, US lawmakers have failed for years to curb annual deficits or reduce spending, leading to a continuous increase in national debt. Moody's stated in the announcement:
This downgrade represents a decline of only one level on Moody's 21-level rating scale used to assess the credit health of entities.
Despite the negative short- to medium-term credit outlook, Moody's remains optimistic about the long-term health of the US, pointing out its strong economy and the dollar's status as a global reserve currency as advantages, reflecting a "balanced" lending risk.
Moody's announcement has elicited mixed reactions from investors and market participants, with many expressing skepticism about the agency's revised outlook.
Gabor Gurbacs, CEO and founder of the crypto loyalty rewards company Pointsville, noted that Moody's credit assessments during past financial stress periods have been unreliable, believing that the current outlook is overly optimistic.
He wrote in a post on X on May 17, 2025: "This is the same Moody's that rated subprime mortgage-backed securities as Aaa before the 2007-2008 financial crisis."
However, macroeconomic investor Jim Bianco believes that Moody's recent credit outlook does not reflect a true downgrade of the US government's creditworthiness and described the announcement as "irrelevant."
As of January 2025, US government debt has exceeded $36 trillion, with no signs of slowing down, despite recent efforts by individuals like Elon Musk to reduce federal spending and control national debt.
As debt rises, investors are losing confidence in US government securities, leading to soaring bond yields, which increase the cost of debt repayment and further elevate national debt.
This creates a vicious cycle, as the government will have to attract investors with higher yields to incentivize them to purchase government debt.
Related: Predictions Based on Gold Models Indicate: Bitcoin (BTC) Reaching $220,000 in 2025 is "Logical"
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