Bloomberg Businessweek Wall Street Shrugs Off Downgrade From Moody’s
May 19, 2025
In this discussion, Michael Mackenzie, a Bloomberg news rates reporter, delves into the bond market's reaction to Moody's downgrade of the US credit rating, highlighting looming concerns over increasing national debt. Meanwhile, Mark Gurman, Bloomberg's managing editor for global consumer tech, examines Apple's struggle in the AI space, emphasizing their urgent need for innovation to keep pace with competitors. Both guests connect these financial shifts to broader implications for government spending and the tech industry's future.
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US Fiscal Crisis Intensifies
- The US credit downgrade reflects alarm over soaring debt and deficits impacting America’s financial standing.
- Interest costs now surpass defense spending and threaten to outpace Social Security soon, worsening fiscal strain.
Reserve Currency Doesn't Insulate Forever
- The US enjoys a unique reserve currency privilege despite its debt woes, but higher and more volatile interest rates will increasingly hurt the economy.
- Relying on short-term debt raises refinancing risks that could unsettle investors unless fiscal discipline improves.
Investor Rebalancing Unnerves Markets
- Foreign investors are rebalancing away from US assets, partly due to a weaker dollar and rising interest rates.
- The sizable duration risk in long-term US bonds is a growing investor concern, steepening the yield curve.