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this post was submitted on 16 May 2025
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Again, I'm not saying the credit rating itself will have any impact long term. What I'm saying is that it signifies continued loss of confidence in the US economy by global investors. It's pretty clear that China is dumping treasuries at a record rate, and has already dropped below UK in terms of holdings. Meanwhile, the BRICS are actively working on doing trade outside the dollar which will obviously have an impact on the status of the dollar going forward as well.
The impact of 2008 and 2020 was that millions of people lost all their savings. Each time a crash happens, the working majority ends up on ever thinner margins and less able to withstand the next crash. The US is primarily a consumer economy, and consumption continues to drop because people can't afford to make ends meet. US consumers have accumulated $74 billion in new credit card debt last year, while defaults surged to levels unseen since the 2008 recession. Over half of US households now rely on credit to purchase essentials like groceries, exposing the collapse of wage growth against inflation. Unsurprisingly, consumer sentiment has cratered to its second-lowest level since record-keeping began in 1952. These pressures culminated in an official GDP contraction during the first quarter of 2024, confirming recessionary conditions.
The collapse in spending leads to a classic capitalist crisis of overproduction that feeds into itself. And if US consumption drops, then its main appeal as a global trading partner evaporates as well. Which will necessarily lead countries to continue devesting from US.