Moody’s throws Trump a curve ball

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The writer is the President of the International Credit International Corpse and former Senior Vice President in S & P Latin American debt crisis

Donald Trump just earned a suspicious difference. For the first time more than a century, the United States has no AAA credit rating from any major agency. Moody’s downgraded the United States over the last week of AA1, deprived its last tripal land.

In 2011, a similar reduction in S & P Global Ratings and Fitch in 2023, Moody’s decision for US finances provides an unhealthy judgment.

Each of the “big three” ratings stems from the same basic problem. Error chronic fiscal management due to political paralysis. In 2011, the lowering of the S & P came from a bitter debt from the ceiling battle and considered a deficit reduction plan due to a lack of intensive political polarization and reliable correction.

The Fitch’s operation in 2023 warned of a steady deterioration of US management and perennial debt restrictions. Moody’s now increases the alarm that despite the permanent debt and persistent deficits, Washington has limited budget flexibility. Approval expenses increase, tax revenues remain, and no party is ready to compromise. The agency’s message is clear. The uncertainty of the American party’s challenging and policy has serious financial consequences.

Past shortcomings were unable to intimidate investors, in 2011 the treasures were paradoxically collected, and the 2023 step of Fitch had little impact on US bonds.

This time we saw 30-year-old US treasures in profit in yields, darkening the last peak during the further distribution of the Despite Liberation Day of Trump.

As long as the US government maintains its obligations, the treasury debt will keep its quasi status as a “risk free” benchmark. At present, all three agencies give a stable perspective to the United States, announcing immediate further disorders. But Moody’s warned that if the debt metric or management became deteriorated in the future, another rating is possible. In short, the White House is hooked to prevent a sharp drop in creditworthiness.

Politically, Moody’s verdict has strengthened the defendant game in Washington. Democrats claim that it justifies their warnings on Trump’s fiscal policy. Senate Democratic leader Chuck Shumer called it a “awakening call” to stop the “deficiency” of the Republicans. The Republicans are entering that overcrowding, not tax cuts, are the real culprit, and some release the underestimation as a superpower by rating agencies.

It is a copy of past exhibitions. After the 2011 cutting S & P 2011, each political side pointed to the fingers. During the financial crisis, the Obama administration has also sued its mistakes in 2013, paying $ 1.5 billion to resolve loans to resolve loans. And after Fitch’s 2023, Biden’s officials blew the “arbitrary” move.

The uncomfortable truth is that both sides acquire the prosperous debt of America, but neither will support a lasting solution. “More than more than a decade, the US Federal Debt has sharply increased due to continuous fiscal deficits.

Structural dysfunction – invaded polarization and eternal fight – Serious financial reforms are almost impossible. Dysfunction continues. Without bilateral transaction costs and income, the nation’s fiscal trajectory will worsen, regardless of who captures the Oval office.

A large reason is unpunished, the unparalleled role of the dollar, as the world’s reserve currency. But the share of international reserves in dollars decreased from about 80% in the 1970s, less than 60 percent. Moody’s admits that the predominance of the dollar as a reserve is provided by extraordinary financial flexibility.

Even after the lowering of the past, global investors continued to buy the US debt, looking for its safety, emphasizing that there is no significant alternative to US treasures and liquidity. But that pillow is not foolish or forever. Each debt ceiling frightens and each loan warning chips with confidence in the US economy.

Losing AAA status in the board is a symbolic blow to American reputation. It has to explode Washington to get his fiscal home before the dollar’s faith and the financial uniqueness of the nation intensify.