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US economy in danger: Moody's lowers credit rating to Aa1!
US economy under pressure: Moody's downgrades credit rating, debts rise dramatically. Impact and forecasts in focus.
US economy in danger: Moody's lowers credit rating to Aa1!
The US economy is facing serious challenges as the country's credit rating has been downgraded. Moody’s has downgraded the top grade from Aaa to Aa1, reflecting a worrying trend. A central reason for this decision is the sharply increased mountain of debt, which has almost doubled in the last ten years. In the fall of 2015, the US national debt was $18.1 trillion, while in the fall of 2024 it increased to $35.4 trillion. This development raises concerns about a potential recession in the US, such as fr.de reported.
In addition, financial conditions for the USA are becoming more difficult. Moody's noted that no action was taken to address persistently high budget deficits and rising interest costs. The budget deficit is forecast at 7% of gross domestic product (GDP) this year. US national debt is now over 120% of GDP. That has already led to a fall in the value of the dollar and a rise in yields on 10-year U.S. bonds to around 4.5%, increasing the cost of raising new Treasury bonds, such as zdf.de supplemented.
Consequences of the downgrade
The credit downgrade not only has international implications, but also puts pressure on the dollar and US Treasuries. A weakened dollar could make exports from Europe to the US more expensive, while a stronger euro could jeopardize the competitiveness of European products. Uncertainty in financial markets caused by the US economic situation has already caused gold prices to rise, indicating a flight to safety.
Pimco fund manager Andrew Balls recently warned of “excessive” U.S. debt that, if left unchecked, could reach 150 percent of GDP in five to 10 years. He described the current liabilities as “no longer sustainable”. Trump's protectionist tariff policy also led to capital flight from the USA to Europe in the first half of the year, which could further exacerbate the situation.
The risks to the US economy are clearly visible as the last major rating agencies, including Moody's, have withdrawn the top rating for the US. This could also have an impact on the creditworthiness of other countries, such as Germany, where public debt is 60% of GDP and the budget deficit is only 3%.