US Treasury Secretary Scott Bessent rebuked Moody’s lowered score of US credit score from AAA to AA1. “Initially, I feel that Moody’s is a lagging indicator, and I feel that’s what everybody thinks of credit score businesses,” Bessent stated. “Larry Summers and I don’t agree on all the pieces, however he’s stated that once they downgraded the U.S. in 2011. So it’s a lagging indicator.”
The US Treasury Secretary should preserve that the nation’s financial system is in sound well being. Former Treasury Secretary Janet Yellen voiced comparable sentiments final yr when Fitch downgraded the US credit score, calling the transfer “arbitrary.” “I strongly disagree with Fitch’s choice. The change introduced at present is unfair and based mostly on outdated knowledge,” Yellen insisted. She then went on to insist the federal authorities had the funds to again two wars in Ukraine and Palestine, as there isn’t any spending restrict for governments.
In 2011, Commonplace & Poor minimize its score additionally after a debt ceiling disaster brought on by politicians. The worldwide markets felt the impression of that information. Fitch has been warning of a potential downgrade since Might 2023, as a result of huge debt burden and political mismanagement. The White Home continued its spending spree and our legislators couldn’t agree on a restrict for the debt ceiling. The warnings had been there.
The distinction this time is that Moody’s has not downgraded US credit score since 1917. The difficulty is just not client confidence within the US and even investor confidence. The first concern is CONFIDENCE within the system itself that has clearly been failing. Over 70% of US debt is short-term, and Washington has been unable to go or adhere to a price range. The Democrats are saying that that is purpose to gather extra tax income, whereas the Republicans purpose to curb authorities spending. Each fail to comprehend that they’re too late both approach, and the system itself should change as a result of the issue can’t be fastened with the identical line of pondering that created this catastrophe within the first place.
Capital is just not going to flee the US due to Moody’s downgrade. The place else would it not go?
Scores businesses are certainly reactionary fairly than proactive. The debt disaster has been looming for a very long time. The Financial Confidence Mannequin turns once more in late 2026, and we’re watching the start of the tip for presidency debt as a reliable asset class.
