Moody’s Downgrades US Credit Rating
Moody’s Downgrades US Credit Rating. Will our credit downgrade lead to higher borrowing costs? It’s what’s in not so “Beautiful Big Bill” that is causing the downgrade.
Should we really be concerned with this Moody’s, which is one of these reigning services. They dropped the credit rating of the United States. Now, I think if we’re going to go about this politically, people can say, “oh, look what the tariffs have done.” No, no, no, this is about debt. And we still have an outrageous amount of debt, and we have done nothing about it. And the Biden administration only made it worse. And have we reined in spending in a way that can bring this back? Meaning, is this credit downgrade nothing more than a trailing indicator? And it could come back. Dr. Matt Will joins us, economist at the University of Indianapolis. Let’s start, Dr. Will, where we start, uh, credit rating, how important is it?
It’s extremely important, Tony, because the credit rating is what sets the benchmark rate for the world. the US Treasury is the risk-free asset of the entire world. Every interest rate in the world goes on top of it. It builds, it starts with the treasury rate, then goes up and we’ve had two downgrades. Moody’s is arguably the number one or #2 largest agency in the world and they have said the US debt is riskier based on recent policies. Interest rates are going to go up and that’s why the market is not happy.
You mentioned recent policies, are you saying that this is tariff related and not Biden spending related?
No, no, it’s there… tariffs is one of the six reasons. So, we’re going through the Moodys document. They, they kind of outline it, but I’m, I put it into 6 buckets and tariffs are one of them, but it’s the last one. Some of this is not holdover from Biden. Biden’s already destroyed the rating back in 2023. That’s why Fitch downgraded it. This stuff is all Trump related and it’s all in the not so big and not so beautiful bill. That’s what they outline in their six points.
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