Moody’s credit qualification agency reduced the credit rating of the United States Government to AA1, citing the growing national debt as the main driver behind the reduction of solvency.
According to the May 16 announcement of the qualification agency, US legislators have not expressed annual deficits or reduce spending over the years, which leads to a growing national debt. The qualification agency wrote:
“We do not believe that several years material reductions in mandatory spending and deficits will result from current tax proposals under consultation. During the next decade, we expect larger deficits as increases in rights, while government income remains widely plans.”
The credit reduction is only a degree of the 21 notches rating scale used by the company to evaluate the health of an entity.
Despite the short and medium -term negative credit perspective, Moody’s maintained a positive long -term health perspective of the United States, citing its robust economy and the state of the dollar as the global reserve currency as strengths.
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Investors react to Moody’s US Credit Review
Moody’s announcement caused mixed reactions of investors and market participants, leaving many not convinced by the revised agencies.
Gabor Gurbacs, CEO and founder of Crypto Loyalty Rewards Company Pointsville, cited the previous credit evaluation times of the qualification agency as unreliable, indicating that the perspective was too optimistic.
“This is the same Moody’s as AAA’s great grades for the values backed by high-level mortar that led to the financial crisis 2007-2008,” the Executive wrote in a May 17 x position.
However, the macrococonic investor Jim Bianco argued that the recent Moody’s credit perspective does not reflect a real reduction in the perception of the solvency of the United States government and characterized the announcement as a “citizen nothing.”
The United States government debt exceeded $ 36 billion in January 2025 and does not show signs of deceleration, despite the recently ELON Musk and others efforts to reduce federal expenditure and reduce national debt.
As the debt rises and investors lose faith in the values of the United States government, bond yields will increase, which makes debt service payments increase, further inflating national debt.
This creates a vicious circle since the government will have to attract investors with increasing returns to encourage them to buy government debt.
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