Barrowing of the United States in the crisis: Moody's pulls up alarm level!

Barrowing of the United States in the crisis: Moody's pulls up alarm level!

USA - The creditworthiness of the United States was downgraded by the rating agency Moody’s from "AAA" to "AA1". This decision, which was announced on Friday evening, marks an important turning point because Moody’s is the last of the three major rating agencies that have deprived the US economy. Previously, S&P had already downgraded in 2011 and Fitch in 2023. The reasons for the negative evaluation are diverse, but in particular an expected deterioration in the US financial situation is emphasized, compared to other highly rated states, as well as the step backwards for state finances

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The financial strength of the United States is still recognized, but the increase in public debt, which is now over 120% of gross domestic product (GDP), is considered alarming. A budget deficit of 7% of GDP is predicted for this year, which further increases the financial challenges. In this context, a congress committee approved President Donald Trump's tax reduction plans on Sunday evening, who potentially could increase the US debts by $ 3 to 5 trillion in the next ten years. These measures could further burden the financial health of the United States.

reactions of the financial markets

The downgrading has had an immediate effect on the financial markets. The dollar and the New York stock exchanges came under pressure, and the return for 30-year US state bonds rose up to 5.037 percent, the highest level since November 2023. This development is particularly worrying, since higher returns also mean higher funding costs for the USA in the new debt admission. Experts warn that these developments could shake confidence in the US economy sustainably and that the financial markets will react more sensitively to disorders from the USA in the future.

The creditworthiness of the United States, despite the downgrading to AA1, remains relatively high in international comparison and corresponds, for example, that of Finland and Austria. Nevertheless, critical voices have loud that the decision of the rating agencies is often opaque and is based on mixed factors. While some analysts are optimistic, others expect that the bond markets have to calm down before stabilization can occur.

global effects and forecasts

The downgrading of the US loan could also have global economic effects. In Germany in particular, there is fear that a weaker dollar could make exports to the United States more expensive because the goods become more expensive for US buyers. While the public debt in Germany is 60% of GDP and the budget deficit is estimated at 3%, uncertainty on the financial markets ensures increased volatility, which is also evident in the increase in gold price.

the demand for Trump after a key interest rate by the US Federal Reserve Fed, which, however, acts independently remains unclear how the economic conditions will develop in the coming months. While some analysts make pessimistic predictions regarding a possible debt collapse, others are optimistic that the bond markets and trust in the US economy could return.

Overall, the situation remains tense, and the upcoming developments will be crucial for economic stability both in the USA and international.