Less than three months after Fitch’s credit rating agency downgraded the United States from AAA to AA+, Moody’s Investors Service has changed their US credit rating outlook to “negative” from “stable.”
This move makes Moody’s the last of the big three rating agencies to hold the US credit in the highest esteem, a position that’s looking increasingly tenuous.
And although Moody’s change isn’t a full downgrade… yet… it’s part of a pattern that’s becoming all too familiar:
Financial watchdogs are sounding the alarm over America’s fiscal direction, with each warning more urgent than the last.
As Barron’s says, “The negative outlook from Moody’s is more than a fiscal warning; it’s a wakeup call to the reality of a struggling economy.”
Now, with political deadlock and the national debt growing at an alarming rate, the US government’s financial challenges may be insurmountable.
Moody’s is paying close attention, noting: “Continued political polarization within U.S. Congress raises the risk that successive governments will not be able to reach consensus on a fiscal plan to slow the decline in debt affordability.”
And with Democrats and the Biden Administration sparring with Republicans over spending levels in the 2024 budget…
Plus, Republican hardliners advocating for deep spending cuts to tackle the debt and deficit…
The political climate in Washington is charged with tension and uncertainty.
Case in point: The White House blames Republican extremism for the ongoing fiscal turmoil, with White House Press Secretary Karine Jean-Pierre labeling Moody’s shift a consequence of congressional Republican dysfunction.
And Treasury Secretary Janet Yellen blames dwindling tax receipts.
In other words, it’s the taxpayers’ fault
This is the epitome of “passing the buck” — blaming the American people for the Fed’s fiscal missteps.
And this completely sidesteps the glaring issue of the US government’s excessive borrowing and spending… and how it is pushing the cost of borrowing through the roof.
If this continues, analysts believe the US might not be able to meet its debt obligations.
And with $33.7 trillion in debt and RISING… they may be right.
Because Interest on the debt jumped to $879 billion this year… and that’s a few inches from a trillion dollars in interest payments per YEAR.
MarketWatch says, “The results are plain for all to see. The federal government is currently running a bigger budget deficit, in relation to the economy, than Franklin Roosevelt ran at the depths of the Great Depression: 5.9% of GDP today, compared with 5.8% in 1934.
“The U.S. Treasury Department, in a report published earlier this year, said projected U.S. federal deficits for the next 75 years have a present value of $80 trillion in today’s money. That’s nearing 400% of GDP.
“That’s not even including interest costs.”
Look at this:
The graph shows deficits building up until the recent, sharp drop-off …
And now it seems the deficit may be deepening faster than the government can cover it.
Sky-high interest rates are weighing down on all new Treasuries issued to cover current spending… and the old Treasuries that must be refinanced at higher rates… to help cover the deficits the government couldn’t cover already.
MarketWatch says, “This is especially worrying for retirees, because in most cases, bonds underpin their entire portfolio.”
Forbes agrees and says experts warn downgrades could also “increase interest rates on everything from mortgages to credit cards as part of a domino effect…”
Even CNN knows the score, saying, “Even the prospect of a US downgrade could hurt Americans’ investment portfolios, make it even more expensive for them to borrow money, and make it more costly for the government to pay off its debts.”
And let’s not forget, on top of it all… the US dollar’s value — and your purchasing power — is still shrinking fast.
If Moody’s decides to change its rating to a full downgrade from AAA to AA+…
It may be high time to consider diversifying your assets to help protect your wealth from more economic uncertainty.
Or call 888-529-0399 to schedule a free consultation with an experienced Gold Specialist. There’s no obligation.
October 24, 2023