Moody's has finally changed the US credit rating. It became the last of the agencies of the big three to change the US top rating of "AAA". The outlook has been changed from "stable" to "negative"
Earlier, rating agencies Fitch and Moody's downgraded the credit rating of US government debt by one notch to "AA+".
Why do the leading U.S. agencies look negatively at what is happening? The main problem is the uncontrolled issue of money. It may seem that this size is controlled by the Senate. On the one hand, this is indeed true. The Senate regularly raises the size of the national debt. Theoretically, without this approval, no new money will be printed.
On the other hand, if this were to happen in other countries, their rating would be in the BB neighborhood. Their own rating agencies forgive everything to their own country.
Given rising interest rates and the lack of measures to reduce government spending or increase government revenues, the rating agency expects the fiscal deficit to remain high and debt sustainability to deteriorate. Moody's expects US interest payments to more than double by 2033, from 1.9% to 4.5% of GDP.
It is worth recalling that many other key indicators have also deteriorated since 2000. For example, the U.S. debt burden has grown several times over this time - from 5.7 trillion to more than 33 trillion dollars, and the share of debt in GDP has also increased dramatically over the past 25 years.
The financial crisis of 2008-2009 was the beginning of the disaster. In just five years, debt levels went from over 60% to about 100% of GDP. The next debt spike occurred in 2020 due to the coronavirus crisis and eventually led to the latest record high of 129%.
It doesn't take a prophet to realize that at current interest rates, sustainable and lasting debt reduction is impossible. Especially given geopolitics: war in Ukraine and the Middle East, as well as growing tensions between China and the US.
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