The United States has officially lost the last perfect credit rating, which it had kept for more than a century, after Moody’s reduced its sovereign classification of the higher degree “A-A-A” to “A-A-One”, noting what it described as “constant deterioration and not subject to the opposite” in the debt and impotence indicators, amid chronic political paralysis and inflation in unimaginable financial obligations.
This decision means, according to the Financial Times, that for the first time in its history it became outside the “perfect merit” club for all the three major classification agencies, after the “Standard & Poor’s” had reduced the classification in 2011, and Fitch followed in 2023.
A strong economy and fixed institutions … but!
Moody’s stressed in its statement that the decision to reduce does not reflect a weakness in the institutions of the American state, and does not question the stability of its financial system, but rather stems from the successive political leaders’ inability to agree on a sustainable financial path that guarantees reducing the deficit and controlling public debt, according to the Investteng.com platform.
The agency added that the United States still maintains what it called “exceptional credit power”, which is the size of its economy, its flexibility, and the role of the US dollar as a central international reserve currency, but stressed that these factors are no longer sufficient to compensate for the structural deterioration in the debt indicators.
“We have seen more than a dangerous accumulation in the levels of public debt and interest payments, far exceeded what we see with the similar countries in the classification … and this is what makes the ideal classification not negotiable now.”
Lane numbers
- The numbers talk about themselves, according to “Moody’s” estimates, according to a bulletin in April, the American Federal Disability is expected to reach 9% of GDP by 2035, up from 6.4% in 2024.
- As for the public debt, it will reach 134% of the GDP, compared to 98% at the present time.
- In another disturbing indicator, the agency suggested that interest payments will reach Only to 30% of government revenues by 2035, three times the level recorded in 2021.
The agency described these paths as “not sustainable”, stressing that the failure to take immediate reform steps will lead to gradual erosion in creditworthiness and market trust, according to what the Intefsting Dot com platform quoted from it.
Shock in the markets and political anger
The market reaction came quickly, as US Treasury Bonds returned for ten years to about 4.5%, in a direct indication of a decrease in confidence in the future ability to serve debt without increasing costs.
“This reduction is not just a symbolic amendment … it is a realistic warning bell on the structural financial deterioration in the United States, and an explicit warning of decision makers that the time has started to run out.” Commented.
Yadaf added that “American bonds are no longer considered free of risk as in the past, and this is a worrying thing for markets that depend on them as a basis for confidence and stability.”
As for the White House, the response was offensive, as the US administration spokesman, Kush Desai, was accused of “Moody’s” of the loss of credibility, and said: “If Moodyz had any credibility, silence would not have been silent over the past four years of the financial disaster that Biden has created.”
However, it is noteworthy that the agency’s report did not refer to a specific administration, but rather held responsibility for the “successive departments” that failed to curb the course of the deficit, in reference to accumulations that extend through Republican and democratic departments alike.
“This reduction is the result of many years of financial mismanagement, not just for one term or one policy … it reflects a growing negative point of view towards America’s ability to reform its financial conditions,” Stephen Gray, Director of Investment at Gray Valio Management, told the Financial Times.
The major law .. and the biggest deficit
The declaration of the reduction coincided with the failure of the passage of the new budget bill for President Donald Trump, known as “the Beautiful Great Law”, in the Budget Committee in the House of Representatives, after an internal division within the Republican Party.
The law proposes to extend tax discounts in 2017, which will cost the American treasury about 4.2 trillion dollars within ten years, according to the Financial Times.
The “Committee for a responsible federal budget” indicates that the law will add another $ 5.2 trillion to the national debt during the next decade, despite attempts to reduce $ 663 billion in spending and increase some taxes.
Andy Brender, head of the bond department in “Nat Anes”, said that the reduction came to reflect “the lack of progress in dealing with deficit,” stressing that “the greatest threat today is not the trade war but rather the absence of a financial vision in Washington.”
At the limits of uncertainty
Despite the reduction, Moody’s maintained a stable future outlook, noting that the return of the ideal classification may be possible in the event of the implementation of long -term fundamental financial reforms that slow down and stop the deterioration of indicators.
But the question today is: Is there a real political will capable of stopping this path? Or will the deterioration continue under the pressure of elections, party divisions, and the continuous expansion of public obligations?
The “Moody’s” move – according to observers – is the strongest signal so far, that the United States, despite its economic and institutional strength, is no longer immune from the results of the accumulated financial and political deterioration.
If serious measures are not taken to reduce the deficit and control debt, these warnings may turn into an actual confidence crisis in the global debt markets, and the United States may find itself in front of a more expensive, less stable, and more fragile future than decades.
