Eurodollar University URGENT: U.S. Credit Debt Just Got Downgraded, Is a Crash Next?In a late Friday news dump, Moody's announced it had downgraded U.S. federal government debt. The news sparked a selloff in Treasuries, at least initially. What are the implications for bonds or the economy? It's not what the mainstream thinks it does. Eurodollar University's Money & Macro Analysis Bloomberg What the US Losing Its Last AAA Credit Rating Means https://www.bloomberg.com/news/articles/2025-05-19/us-lost-moody-s-aaa-credit-rating-what-s-at-stake-for-markets S&P Global August 5, 2011 https://disclosure.spglobal.com/ratings/en/regulatory/article/-/view/sourceId/6802837 Fitch August 1, 2023 https://www.fitchratings.com/research/sovereigns/fitch-downgrades-united-states-long-term-ratings-to-aa-from-aaa-outlook-stable-01-08-2023 https://www.eurodollar.university Twitter: https://twitter.com/JeffSnider_EDU
May 20, 2025
Moody's recent downgrade of U.S. government debt raises eyebrows, but the hosts argue its impact is overstated amid chronic fiscal irresponsibility. They delve into how soaring federal debt curtails economic freedom and individual liberties. The concept of depression economics is examined through historical examples like the Great Depression, contrasting it with today’s situation. The discussion also highlights the sometimes exaggerated role of government debt in driving private demand and the evolving dynamics of interest rates.
AI Snips
Chapters
Transcript
Episode notes
US Government Debt Reality
- The U.S. government is the "brokest thing ever created" because of continuous massive borrowings.
- Yet, it can keep borrowing endlessly because the economy itself is more fundamentally broken, reflecting depression economics.
Downgrades Don't Move Markets
- Rating downgrades by Moody's, Fitch, and S&P over the years highlight fiscal irresponsibility but do not impact bond market fundamentals.
- The market often shrugs off these downgrades because they don't change the demand for safe assets in a depressed economy.
Treasury Yields Defy Expectations
- Despite massive debt issuance, Treasury yields have not soared but remained low relative to short-term rates.
- This reflects strong private demand for Treasuries due to economic weakness and lack of viable investment alternatives.