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Moody’s strips U.S. of triple-A credit rating
- Anon84 1y agohttps://archive.md/dnJ7Q https://archive.md/dnJ7Q
- kjkjadksj 1y ago[flagged]
- deleted 1y ago[deleted]
- riffraff 1y agoI wonder if this will trigger a sell of in bonds, there's a common story that some investors are only allowed to invest in triple A bonds, and AFAIK this was the last of the big three still holding it for the US.
- JumpCrisscross 1y ago> some investors are only allowed to invest in triple A bonds The usual language is two out of three. So any investor who had that language and hadn’t gotten around to amending it to exempt Treasuries had already been forced to sell on the second downgrade.
- riffraff 1y agoTIL, thanks!
- tedunangst 1y agoLast time around this led to reduced borrowing costs, so good news, I guess.
- somanyphotons 1y agoI would have expected that a worse credit rating would result in higher interests rates, what happened last time?
- toast0 1y agoWorse credit rating is bad economic news. When there's bad economic news, the market tends to 'flee towards safety', and that means selling risky investments and buying treasuries. When the market is moving capital to treasuries, borrowing costs are reduced. (Doesn't always happen like this, and may not have happened like this last time, but it's not uncommon)
- robocat 1y ago> flee towards safety The search term is "flight to quality", and Matt Levine was writing how it was a bit broken recently due to GOP messing around.
- JumpCrisscross 1y ago> Last time around this led to reduced borrowing costs Last time Treasuries were unambiguously a haven asset. That correlation was broken on Trump’s liberation day. Altogether, I’d be surprised if this downgrade has a material impact on financial markets. It’s much more interesting for the House.
- actionfromafar 1y agoThis time it’s about owning the libs and making some serious money on inside trading. Everything else is secondary. So it will play out differently.
- quickthrowman 1y agoIncorrect. > Fitch Downgrade August 1 2023 > SPY around 455 fell to 433 from August 1 to August 18 > By October 27th SPY bottomed around 410 (-10%) > From August 1 to October 23, US 10y yield went from 3.9% to 5% Stocks went down and bond yields went up last time. The Federal Reserve raised the federal funds rate from 5-5.25% to 5.25-5.50% during the same time period.
- deleted 1y ago[deleted]
- tehjoker 1y agoDidn't we lose this about a decade ago during the 2013 government shut down where the Republicans were threatening to miss payments and we got knocked down to AA-? I was wondering if we ever got it back to AAA.
- bobthepanda 1y agoThere are three ratings agencies and the other two downgraded but not Moody's (until now)
- fullstackchris 1y agoWas gonna say, I thought this already happened last year...
- quadragenarian 1y agoNot to be overly pedantic but there are more than 3. It's just 3 that are commonly used in asset management (S&P, Moody's, Fitch). Others include Morningstar DBRS (Dominion Bond Rating Services - rates primary Canadian debt issuers). Kroll is another one (used to be Duff & Phelps).
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- A4ET8a8uTh0_v2 1y agoThe reality is that the current trajectory is not exactly sustainable. So, for once, Moody seems to be doing its job. As to where they were for the past decade or so ( lets charitably say they were still trying to figure out where things land post 9/11 ), when all those issues were allowed to fester, is not exactly a big secret. The simple reality is that US will need to go through a period of pain to correct some of those excesses. It will not be fun for anyone, which is why there is so much effort put forth to kick can down the road. And the part that really gets me is that congress is discussing cutting taxes, fed is being pressured to lower rates.. as if all those things were not at least a factor in the mess we are in now.
- deleted 1y ago[deleted]
- toomuchtodo 1y agoThe reality is taxes must go up, and the bond market will force it to happen. You can’t keep issuing debt forever to steal from the future for today when all of the evidence points to lower future growth. Voters might be unsophisticated, but the bond market is not. > Bond vigilantes, who can bring fiscally irresponsible politicians to heel by unloading a country’s debt, may rear their head if Congress doesn’t show any appetite to bring the federal deficit under control. https://usafacts.org/government-spending/ https://usafacts.org/government-spending/ https://finance.yahoo.com/news/bond-vigilantes-killed-trump-reciprocal-110200094.html https://finance.yahoo.com/news/bond-vigilantes-killed-trump-... https://ghpia.com/wp-content/uploads/2024/07/Investment-Insight-The-Bond-Markets-Role-in-Shaping-U.S.-Fiscal-Responsibility.pdf https://ghpia.com/wp-content/uploads/2024/07/Investment-Insi...
- A4ET8a8uTh0_v2 1y ago<< Bond vigilantes, who can bring fiscally irresponsible politicians to heel I don't want to give people ideas, but at the same time this is not exactly new to anyone following that set of news. During last EU fiscal crisis, EU came up with a novel approach to handling bond issues. Haircut[1]. [1]https://www.sciencedirect.com/science/article/abs/pii/S1057521920301113 https://www.sciencedirect.com/science/article/abs/pii/S10575...
- pseudolus 1y agoMoody's is in what is, currently, a hazardous line of business. Whatever their accuracy (their performance leading up to the financial crisis in 2008 didn't particularly lend them any credit) the reality is that they are certainly likely to be the target of informal (browbeaten in the media) and formal (investigations undertake by various agencies) actions in the short-term. They've unleashed a shit storm upon themselves the likes that they have probably never seen before. Some late night posts on Truth Social are likely to be imminent.
- deleted 1y ago[deleted]
- actionfromafar 1y ago... and if they don't give their honest assessment, they are making themselves obsolete anyway.
- shkkmo 1y agoSince the other 2 of the 3 major rating agencies had already made this downgrade...I guess they're all targets and all that already happened to them?
- pseudolus 1y agoI don't believe that either Standard & Poor's or Fitch downgraded the U.S of its triple-A credit rating during the current administration so they're relatively immune to any attack. Moody's is a "victim" of bad timing.
- 9283409232 1y agoWhat does this mean for the laymen around here? I'm the laymen if I'm not being clear.
- mmooss 1y agoA direct, easily defined consequence is that you pay more taxes because the US must pay higher interest rates on vast amounts of money it borrows. It also creates instability generally - in the economy, business, socially, politically - because unreliable US government finances can destroy all those things.
- aryehof 1y agoIt means US instruments of debt are to be considered a little less trustworthy. This affects their price, value and attractiveness versus alternatives.
- awongh 1y agoFor Moody's or any other agency, do they have any real insight on credit worthiness? I would have just assumed that if you're another big financial institution you're doing your own research. Is it that orgs below a certain size need these people to help tell them what's going on? I would have also assumed anyone who holds an important amount of US treasuries does their own research and doesn't need to listen to any of these agencies? What actual value do they provide? (esp. in light of the housing crisis proving they weren't providing any value at all?)
- SOLAR_FIELDS 1y agoIndeed, these were the same people that were reporting A+ on junk bonds back then, weren't they? Why are they even still around? https://www.theguardian.com/business/2017/jan/14/moodys-864m-penalty-for-ratings-in-run-up-to-2008-financial-crisis https://www.theguardian.com/business/2017/jan/14/moodys-864m...
- buckle8017 1y agoThey are indeed, Moody's ratings are Junk Ratings.
- aprilthird2021 1y agoThere's a huge trend here, and in general comment sections online, where if you made a mistake, even a catastrophic one, then as an organization you are useless. Moody's has been in this game a long time, I'm sure they're not perfect, but also being wrong once doesn't mean you're always wrong. Doesn't anyone here think the US recent economic instability merits a reduction in credit rating? We have a massive amount of debt (we borrowed to pay something like $800 billion in interest on our debt last year) and are essentially betting on our rocketship economy to offset our enormous debt in the future. The latest economic turmoil does cast a bit of doubt on that ability to pay off this huge debt later on no? I mean, isn't that a reasonable conclusion, regardless of whether you hate Moody's or think they are stupid?
- awongh 1y ago
- animitronix 1y ago[flagged]
- mullingitover 1y agoThe US can issue currency to cover debt obligations. There should never be a situation where debts wouldn't be paid, the problem can just be printed away. The idea that the people who can print more money and pay the interest just wouldn't do it, out of what, spite? Incompetence? Seems pretty bad. The fact that one party is always behind this financial profligacy, and the US keeps putting it in charge, probably means that the US' debt rating is still much too high.
- deleted 1y ago[deleted]
- A4ET8a8uTh0_v2 1y agoUnfortunately, even in games, infinity money can only get you so far.
- potato3732842 1y agoAt the end of the day we either reign in the debt or the currency collapses and we're forced to reign in the debt. On a long timeline there is no way to not reign in the debt.
- mullingitover 1y agoThe US is effectively the world's bank. Everyone saying the US needs to cut its debt is basically saying, "The most successful bank in town needs to stop taking deposits," which seems like bad business for a bank. The debt is just the sum of deposits. The problem isn't the debt, the problem is a lack of imagination/ambition in finding good investments for the capital that's being handed to the US. Saying the debt should be cut is saying "We're terrible at business, don't have good ideas, you all need to find smarter and more responsible people to entrust with your capital. We plan to underachieve."
- s1artibartfast 1y agobanks make money on investing their on their deposits, governments do not.
- scrlk 1y agoThe US now has a lower credit rating than Microsoft: > The Microsoft corporate credit rating is AAA and Aaa by Standard & Poor's Rating Services and Moody's Investors Service Inc., respectively. https://www.microsoft.com/en-us/investor/faq https://www.microsoft.com/en-us/investor/faq
- srvo 1y agothe corporate credit rating scale is different from the sovereign one. That said, msft credit has traded through govt bonds multiple times. So arguably the market-based rating system agrees with you (even though the ratings agencies dont neccessarily)
- aprilthird2021 1y agoMicrosoft is smarter and handles it's finances better than the US government, so fair enough
- pwarner 1y agoBut they lack the power to raise taxes, and print money. Also an army.
- Iwan-Zotow 1y agoWindows tax anyone?
- defrost 1y agoDunno 'bout that, King William III had an army and navy in 1696 and controlled the Royal Mint that issued coin. It's an interesting aside that the Windows tax in great part was driven by revenue loss resulting from coin clipping.
- prewett 1y agoParent did not provide a link, but apparently there was a historical tax on actual windows: https://en.wikipedia.org/wiki/Window_tax https://en.wikipedia.org/wiki/Window_tax
- standardUser 1y agoThe elephant in the room is that the US had been operating as the chief architect and manager of the global economy for the last 80 years, a role that made it the wealthiest and most powerful and most technologically advanced nation on the planet. Under Trump the US has voluntarily relinquished that role, and we're seeing lots of these little adjustments as the system flails as it adapts to it's previously steadfast leadership contorting erratically. But the real damage done isn't about credit ratings or trade agreements or Trump's ridiculous kidding-not-kidding tariffs. It's about a different power settling into the role as the indispensable trading nation, and one that prides itself on its stability and unopinionated economic cooperation. In other words, we're hosed.
- mmastrac 1y agoTragically hilarious from an outside perspective that a leader sees all the expense of the soft-power the US has paid so much for as "freeloading". Either you are the world leader and invest to stay in that position, or you're just one of the pack.
- transcriptase 1y ago[flagged]
- whatshisface 1y agoThat's insane, how would the military be able to force the US public (who holds the majority of the debt) to continue borrowing?
- ewanmcteagle 1y agoThis is completely incorrect. Even if you believe the premise, you cannot expect others to lend money to you when you obviously refuse to pay back previous creditors and then the premise becomes incorrect because the debt will not be a safe bet.
- transcriptase 1y agoYou’re missing the point. Though it would never come to it, the U.S. will always be able to pay back creditors because it could, in theory, simply take whatever was needed to settle. Uncomfortable to reconcile but ultimately true at present.
- mindslight 1y agoWhat is with this pervasive assumption that the US owing other countries in USD somehow implies that the US might somehow end up wedged trying to pay back debts denominated in USD? These are not household finances - the US is monetarily sovereign. The US can always pay any USD-denominated debt by conjuring new money, meaning politics is the only thing that can actually cause a default. Your top level comment is basically a huge red herring. The dynamic is not one of the US starting a war to take others' lootable assets to pay off debt denominated in USD. Rather, benefiting from US military hegemony in the future is what other countries are buying into when they choose to store their wealth in USD. They accept the demurrage from holding continually-inflating USD as the cost of moving bulk wealth forward in time, and our spending much of the proceeds of that arrangement on maintaining our global hard and soft power made perfect sense. Trump's policies have directly made the US an unreliable ally, and therefore made USD less attractive. Monetary inflation has always been acceptable (there isn't a better game in town). But after our allies have trusted buying shares in our economic empire, leaving them high and dry or overtly extorting them for even more is breaking the arrangement. All of these points about "cutting spending" and "making other countries pay their share" are essentially quack narratives covering for actions aimed at directly undermining the United States and the Dollar. It's even more blatant when you see things like spending is not actually being cut. Presumably if he (they?) succeed at the goal, the plan is to blame the results on purported inevitability when the reality will be that they blew it up.
- siliconc0w 1y agoThere is a ton of low-hanging fruit that could lower the debt that would result in little to no austerity. Carried interest/corporate tax avoidance, means-test social security, remove needless subsidies for fossil fuels or corn/sugar that add to health costs, or eliminate PBM formularies and enable medicare drug negotiation and fraud reduction. Maybe a few hundred billion right there. Long term reforms to make education and healthcare outcomes focused, punishing administrative overhead and rewarding performance. Similarly defense could be massively downsized IMO to just expendable drones and submarine based nuclear deterrence, we don't need a 'triad' - one ballistic sub can basically end the world. Replace defense contracts with guaranteed purchase orders and let the private markets figure out how to do hypersonics or missile defense.
- ajross 1y agoReally no. As much as deficit nuts want to grasp at this as a confirmation of priors, this is absolutely 100% not at all about "The Debt". (In point of fact outstanding[1] debt as a fraction of GDP isn't even all that large, historically; it was much higher in the 80's and literally every one of those bonds is now paid off!) We could magically pay it off right now and the US would still look like a credit risk. It's all about trade policy right now, and the general existential risk that we blow it all up. The treasury rate spike in April (likely but inconclusively due to strategic dumping) continues to have everyone spooked, and fiscal restraint, tax policy, austerity, etc... don't speak to that concern at all. [1] Corrected: service cost of the debt
- scoofy 1y ago>In point of fact outstanding debt as a fraction of GDP isn't even all that large, historically; it was much higher in the 80's and literally every one of those bonds is now paid off I think you are very much mistaken: https://fred.stlouisfed.org/series/gfdegdq188S https://fred.stlouisfed.org/series/gfdegdq188S
- ajross 1y agoI did indeed say that wrong, the nominal debt was lower but the cost to service it was much higher (borrowing in the 80's was done at interest rates into the double digits!): https://fred.stlouisfed.org/graph/?g=iEiV https://fred.stlouisfed.org/graph/?g=iEiV Again, if the debtpocalypse didn't happen then it's clearly not happening now. This is simply not about fiscal policy. Period. It's about institutional trust in the government's ability to manage payments.
- yongjik 1y agoAll the talks about US national debt being "unsustainable" rings hollow, when you consider that Trump did everything to tell debtors that the US government is no longer a trustable entity and lending it money might be a bad idea. In other words, Trump made sure that the US debt situation is unsustainable. I don't know if it was sustainable before Trump (seemed pretty stable to me), but whatever the situation was, Trump made it infinitely worse. To me this is just another example of Republicans saying the government is broken, when what they really mean is "because we will make it so."
- scoofy 1y agoThe two theories that are competing right now are the: * Dollar "Milkshake" Theory: the dollar (and treasuries) are so in demand that it kind of doesn't matter how far into debt we go, because the point is that treasuries are mostly used for financial collateral, not for earning interest payments. So whenever there is a crisis, there will be a rush to the dollar, not away from it. * Traditional Fixed Income valuation: that fixed income buyers care about real returns, and will penalize nations that get themselves into situations where they must either default in actuality, by refusing to pay their debts, or by effectively defaulting (in real terms) by inflating their currencies to the point of writing off their debts. I understand the argument from both perspectives, and I understand that politics can easily lead to defaults that don't technically need to happen. I still have no idea which of these two theories will prove more accurate going forward. I generally consider myself pretty fiscally conservative, so I tend to lean toward traditional theories of fixed income.
- disgruntledphd2 1y agoThe biggest thing supporting the US market (debt and securities) is that there is nowhere for that money to go, absent absurdly large changes. If this happens (50/50 I think over the next twenty years) then it will be slow, and then sudden. I suspect a lot of high income US citizens will start caring a lot more about Social Security at that point.
- scoofy 1y agoI mean, alternatives already exist to the SWIFT network: CIPS (China), SFMS (India), even the INSTEX (Europe) system is in place if a European system were needed quickly. Insofar as "where the money goes," the sovereign bond market is huge, and if the milkshake theory is to be believed, finding and alternative is just a coordination problem that could be effectively solved by a few large actors. If the traditional theory is to be believed, downgrades from ratings agencies should simply facilitate the movement of folks leaving treasuries as a risk-free rate. This does introduce currency risk (though it existed already), but we may simply move to baskets of securities of we don't end up on a single currency to carry bonds in general. There is also the "store of value" vs "transactional" aspects to currencies, and the dollar may become more and more transactional and less useful as a store of value and/or collateral. If that's the case, I wouldn't be surprised if there were not more "asset inflation" if that's even a useful term. I agree with you that it should be slowly and then all at once, because if the US is going to default or debase, nobody wants to be the greater fool.
- thomassmith65 1y agoWhite House communications director Steven Cheung reacted to the downgrade via a social media post, singling out Moody's economist, Mark Zandi, for criticism. He called Zandi a political opponent of Trump. https://reuters.com/markets/us/moodys-downgrades-us-aa1-rating-2025-05-16/ https://reuters.com/markets/us/moodys-downgrades-us-aa1-rati... It's always someone else's fault.
- insane_dreamer 1y agoI was wondering how long it would take before Trump targeted Moody.
- Terr_ 1y agoI'd wager that's a significant portion of the reason Moody's tried to spread the blame across multiple administrations: They know the current one is thin-skinned and prone to illegal retaliation.
- chneu 1y agoLol he attacked Walmart because Walmart said they're raising prices in response to the tariffs.
- brandensilva 1y agoI think the real reason is a Walmart heir put out an ad encouraging people to be civically responsible which Trump admin saw as defiance to him. Plus I assume they aren't bribing Trump like the tech bros are.
- insane_dreamer 1y agoThey weren’t in the front row at the inauguration. But I think they’re much less vulnerable than tech companies.
- rurp 1y agoRemember way back in Feb 2025 when a bunch of people were claiming that Elon and Doge were going to fix the national debt?! I recall a lot of skepticism from some to the notion that Elon had zero interest in reducing the defecit and wasn't even trying. > Moody’s said it expected federal deficits to widen to almost 9 per cent of GDP by 2035, up from 6.4 per cent last year, owing to increased interest payments on debt, entitlement spending and “relatively low revenue generation”. Yes, and this was extremely predictable. Hopefully once the disaster gets a bit more clear more people will see what's happening.
- mempko 1y agoPeople forget that every transaction has two parties. Someone's debt is another's asset. The national debt is mostly owned by Americans. That means the national debt is an asset to the private sector. This is the way all money works because money IS debt. The real crisis is high debt loads in the private sector, not the government. Why? Because the government owns the currency it's debts are denominated in. There is zero risk the government couldn't pay it's dollar debts if there is still a US government. The only reason to downgrade is if there is a real risk the US government will collapse and cease to exist for political reasons. There is no fiscal risk. The deficit hawks don't understand how money works. The real concern is private debts, not government debts. But you never hear about that in the media.
- jaredklewis 1y ago> The real crisis is high debt loads in the private sector, not the government. Why? Because the government owns the currency it's debts are denominated in. There is zero risk the government couldn't pay it's dollar debts. Right, but it isn't like the government controlling the money supply is some sort of get out of jail free card. If it was, why would the government even have debts? US could just pay off all the debt right now. If the government starts printing money to pay interest on or pay off our $35+ trillion dollar debt, that will cause inflation, which is like a regressive tax. If the government doesn't start printing money, then a greater and greater share of our tax revenues go towards paying the interest. Neither of those outcomes seem particularly good to me. Debts in the private sector have other downside like economic instability, but it seems to me that private sector lending is responsible for a lot of great economic developments (of course including our little VC funded corner of the world).
- barchar 1y agoThe US can only default on its debts in some kind of fit of self-destruction (by choice). Any amount of debt is "sustainable". I'm not even sure why moody's bothers.
- footlose_3815 1y agoIf only this could have been prevented /s
- AbstractH24 1y agoMy only question is how high to let markets climb before buying long dated protective-puts
- spwa4 1y agoNote how Moody's says directly that Trump's policies will increase government spending (by a lot, I might add). They also's directly state it's Trump's tax policy. Not anything else. Trump is the direct reason the US' credit rating drops. Yet another reason to state the obvious: Republicans, and definitely not Trump, care about the US's debt or low taxes.
- prewett 1y agoThis should be no surprise. They've been talking about "balanced budgets", but ever since Clinton actually balanced the budget, they yell about balanced budgets in Democratic presidencies (which reduce the deficits), and then in Republican presidencies they cut taxes without reducing revenue.
- spwa4 1y agoYeah but it's still amazing just how much Trump wants to give to himself and the rich. The "tax cuts" (which aren't tax cuts, they're entirely debt financed, which republicans keep telling me isn't a tax cut) he already did in 2016 were, per year, slightly less than social security + medicaid. If this Moody's report is to be believed the now-planned tax cuts will be more than social security + medicaid. So Trump wants to TRIPLE social security and medicaid expenses ... with just 2/3 going to him and the rich.
- throw0508 1y ago[dead]
- ArtTimeInvestor 1y agoThere are two ways to solve this: 1: Earn more and spend less So this number goes up: https://fred.stlouisfed.org/series/FYFSGDA188S https://fred.stlouisfed.org/series/FYFSGDA188S 2: Print more money So this number goes up: https://fred.stlouisfed.org/series/BOGMBASE https://fred.stlouisfed.org/series/BOGMBASE
- deleted 1y ago[deleted]
- justinwp 1y ago> 1: Earn more and spend less Or grow the economy at a faster rate.
- JumpCrisscross 1y ago> Or grow the economy at a faster rate Tough to do that while deficits and taxes are being jacked up.
- ffsm8 1y agoIsn't your "or" literally what you then proceed to a state? I guess he could've removed the "or" and made it three points, but currently it'd be covered by that point - or are we interpreting the sentence differently?
- brookst 1y agoOr just, you know have a stable and predictable government not let be a senile narcissist and a drug-addicted billionaire.
- deleted 1y ago[deleted]
- starchild3001 1y agoGuys, we have predictable problems -- namely deficit. And "unpredictable" problems (such as covid and the great financial crisis). So I think US cannot even control the predictable problems that are within our control. What do you think will happen when the next unforseen crisis hits? Sadly, the government's main responsibility is to minimize the likelihood and cost of so-called "unpredictable" problems, yet through the actions of DOGE and similar regulation cutting zeal we're only increasing their likelihood and making the outcomes worse. Moody's is doing us a favor by calling our debt A- (or whatever), it's in fact junk at this point. We're one crisis away from complete bankruptcy, which is bound to happen thanks to reckless governance. PS: See how Clinton/Bush Jr's deregulatory policies were a major contributor to the great financial crisis. See how Trump took over a pandemic playbook and office from Obama, only to disband it upon arrival. If the federal government won't even try to protect us from systemic risk, who will?
- steve76 1y ago[dead]