Source: Cointelegraph
Original text: (Moody's downgrades U.S. credit rating due to rising debt)
Moody's credit rating agency has downgraded the U.S. government's credit rating from Aaa to Aa1, noting that the continuously rising national debt is the primary reason for the downgrade in creditworthiness.
According to the announcement released by the rating agency on May 16, 2025, U.S. lawmakers have failed for years to curb annual deficits or reduce spending, leading to a continuous increase in national debt. Moody's wrote in the announcement:
This credit rating downgrade only fell one level on the 21-point rating scale used by Moody's 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 U.S., pointing to its strong economy and the dollar's status as a global reserve currency as its advantages, reflecting a 'balanced' loan risk.
Moody's announcement elicited mixed reactions from investors and market participants, with many expressing disbelief at the agency's revised outlook.
Gabor Gurbacs, CEO and founder of the crypto loyalty rewards company Pointsville, pointed out that Moody's credit assessments given during past financial pressures have been unreliable, considering this outlook overly optimistic.
He wrote in his X post on May 17, 2025: “This is the Moody's that rated subprime mortgage-backed securities as Aaa before the financial crisis of 2007-2008.”
However, macroeconomic investor Jim Bianco believes that Moody's recent credit outlook does not reflect a true downgrade of the U.S. government's creditworthiness and described this announcement as 'insignificant.'
U.S. government debt exceeded $36 trillion in January 2025, with no signs of slowing down, despite recent efforts by figures like Elon Musk to reduce federal spending and control national debt.
As debt rises, investors lose confidence in U.S. government securities, causing bond yields to soar, leading to increased debt repayment costs and further escalating national debt.
This creates a vicious cycle, as the government will have to attract investors with higher yields to incentivize them to buy government debt.
Related: Predictions based on gold models show: Bitcoin (BTC) hitting $220,000 in 2025 is 'logical'
