America's Self Destruction Continues to Spread through the Economy

Market Commentator & Financial Writer
March 26, 2025

The gradual demolition of the US credit rating continues as Moody’s today warns that the United States’ fiscal condition has deteriorated since its last downgrade a little over a year ago and that it believes the US is set to continue on that downward trajectory. The US, in fact, is no longer even the best horse in the glue factory—a status that I once said helped it avoid dying under the weight of its debt:

The report comes amid heightened uncertainty in U.S. financial markets as President Donald Trump's decision to impose punitive tariffs on key trading partners has sparked investor fears of higher price pressures and a sharp economic slowdown.

"Even in a very positive and low probability economic and financial scenario, debt affordability remains materially weaker than for other Aaa-rated and highly rated sovereigns," Moody's said.

Moody's is the last among major ratings agencies to keep a top, triple-A rating for U.S. sovereign debt, though it lowered its outlook in late 2023 due to wider fiscal deficits and higher interest debt payments.

Fitch cut the U.S. sovereign rating by one notch to AA+ from AAA in 2023, citing fiscal deterioration and repeated down-the-wire debt ceiling negotiations that threaten the government’s ability to pay its bills. It was the second major rating agency to strip the United States of its top triple-A rating, after Standard & Poor's did so after the 2011 debt ceiling crisis.

There was a time when all other nations were worse than the US fiscally and politically, but the empire is deteriorating due to its years of profligacy that now pervade its thinking, giving it a false sense that its former greatness continues when it is being more seriously damaged every day. Like swamp creatures that don’t notice how dirty the water is, we have learned to live choking on this slough of debt.

The one thing making the US debt manageable, though barely, has been the US dollar’s status as the global trade currency; but tariffs will give that status some hard knocks because lower trade means other nations have less use for the dollar. That was a serious chain reaction in US credit risk that laid out in a Deeper Dive earlier this year: “Trump Tariffs Could Be Nuclear Time Bomb for National Debt.” What the BRICS nations could not and never came close to doing, tariff wars may manage much more effectively.

Nations don’t buy the dollar to be nice. They buy dollars because they need them foreign exchange. If the tariffs actually get implemented as extremely by Trump as he originally said they would be, they will significantly throttle back trade. Without the need for as many dollars, the central banks of other nations will ditch the dollar. That means a lot fewer buyers of US Treasury bonds because they are the vehicle by which the central banks exchange their dollars. When that happens in an environment of slowly crumbling US credit ratings, it will start to result in higher interest on the gargantuan US debt … where a little interest goes a long way!

Moody's said on Tuesday that lower U.S. debt affordability has meant that the central role of the dollar and the Treasury market in global financial markets has become more critical in supporting the triple-A rating.

However, the potential negative economic impact of tariffs as well as the prospect of unfunded tax cuts complicates the picture.

"We see diminished prospects that these strengths will continue to offset widening fiscal deficits and declining debt affordability," it said.

No wonder consumers are trembling

This is playing out as Republicans continue to push a deeply deficit-dependent budget that continues to blow a hole as deep as Bidenomics did. It is also happening as US consumer confidence sinks to a multi-year low.

The US consumer confidence index fell to its lowest reading in four years, new data released Tuesday showed, as Americans face higher costs and fret the fallout of US President Donald Trump’s trade policy.

The tariff wars don’t just affect the willingness of other nations to trade with us; they affect the willingness of Americans to spend money inside of America as well. It’s always been the case that, as consumer confidence falls, spending starts to tighten up defensively, helping pressure the US deeper into recession.

The findings show how Trump’s tariffs, the trade war, and market volatility have begun to weigh on households, as economists warn of rising odds of a recession. Consumers are also facing sticky inflation and high borrowing costs.

That’s the stagflation scenario I’ve been saying our years of profligacy end in. Trump’s tariffs during a time of major government reductions are the insurance that we get there.

Moreover, the need of the United States to borrow just to cover the interest on its debt continues to grow, the government competes for all available credit against all of its citizens, driving up the price of credit for all. That is just a fact of how it works—supply and demand. The government creates huge demand on the available credit supply; then, as nations turn away from the US, the supply of sources of credit funding diminishes.

CFO gloom

It should be no surprise, in this insidious creep of sour economic conditions, that the chief financial officers of major corporations are expressing a lot more pessimism than normal.

The economy will enter a recession in the second half of 2025, according to a majority of chief financial officers responding to the quarterly CNBC CFO Council Survey.

CFOs describe themselves as generally “pessimistic” on the overall state of the U.S. economy and uncertain about the stock market.

95% of CFOs said policy is impacting their ability to make business decisions, and many said while Trump is delivering on promises, his administration’s approach is too chaotic, disruptive and extreme for businesses to navigate effectively….

Shifting messages from President Trump that continue to add confusion to the tariff planning process haven’t helped….

While some chief financial officers said Trump is doing what he promised on the campaign trail, many CFOs said the way he is going about delivering on his agenda is not what was expected.

Too chaotic for business to navigate effectively” was how one CFO respondent framed their view of Trump’s second term to date.

“Extreme;” “Disruptive;” “Aggressive;’ “A wild ride,” were some of the other ways CFOs portrayed their current view.

65% of CFOs polled say they now expect a recession in the second half of the year.

New “recession watch” indicators are being created, and … ninety percent of CFOs say tariffs will cause “resurgent inflation….”

Tech turning on Trump

Even the most conservative leaders in the tech industry are turning on Trump. That includes some who are part of the administration, who are saying they are in a state of turmoil.

They are bristling at how the president's chaotic governing, unusual even by the standards of Trump 1.0, is making it increasingly difficult to run their companies.

"None of my friends who voted for Trump are happy right now. Everyone is annoyed," says Reggie James, the founder of Eternal, a new-media company backed by Andreessen Horowitz. "When tech people got involved in the government, they thought Trump was going to take more of a surgical approach and act less like a wrecking ball."

Sound familiar?

The disenfranchised billionaires have more to say:

Several Silicon Valley executives I spoke to — some of whom requested anonymity for fear of retribution — echoed this sense of disappointment, in particular at the havoc the Department of Government Efficiency has wreaked throughout the federal government. "We were all on board for a more business-friendly presidency, but in the end, the whole industry of crypto and AI got rug pulled," says the partner of a top-tier venture firm directly involved in the Trump administration. "The people surrounding Trump are all scamsters. They are getting rich off our votes, our dollars, and our time…."

Others are exasperated with what they see as unscrupulous dealings with cryptocurrencies. The tech industry itself has a fraught relationship with crypto: Investors were burned by Sam Bankman-Fried's fraudulent FTX, and many tech leaders regard cryptocurrencies as Ponzi schemes with little functional value that stain the tech industry at large. Where the Biden administration took a hard-line approach to crypto, Trump has enthusiastically embraced the crypto community….

On X, the Palantir cofounder and vocal Trump supporter Joe Lonsdale compared creating a digital currency reserve with taxpayer dollars to theft: "It's wrong to steal my money for grift on the left; it's also wrong to tax me for crypto bro schemes," he wrote. Lonsdale tells me over email that he objects to the administration naming individual coins in "a way that moved markets and meant people could trade them ahead of time." The executive branch, he said, shouldn't be in the business of "picking winners and losers."

The crypto craze in government is this early in the first year of Trump 2.0 already turning into the rankest form of fascist economics:

That same venture capitalist who is advising the Trump administration also claims that crypto founders are using their proximity to Trump for personal gain. Steve Witkoff, for instance, a longtime Trump associate who was appointed as the United States special envoy to the Middle East, has been cashing in on his proximity to Trump to secure private deals, this person says.

Early in March, Steve Witkoff sent cryptocurrency advocates to the Middle East to promote World Liberty Financial's latest stablecoin project, The Wall Street Journal reported. "Steve Witkoff is calling every sovereign government and saying, 'You need to support this coin if you want to be in good standing with Trump,'" the person says. Witkoff did not respond to multiple requests for comment.

That’s just plain corrupt cronyism.

Still …

"Democrats think that Trump wants to help billionaires, but that's not the case," says Noah Smith, an economist who writes a popular Substack called Noahopinion. "Trump is kicking the shit out of America's billionaires. To be a billionaire who continues to support Trump even as your entire portfolio plummets would mean that you're an insane cultist who loves having your wealth destroyed, and you don't become a billionaire by being an insane cultist who loves having your wealth destroyed."

"The people that are very unhappy right now — the people who should have been the staunchest supporters in the tech world — are getting the rug pulled out from under them," Smith continues. For now, the tech industry is clinging to the hope that any economic setbacks will only be temporary.

The center no longer holds

I won’t waste time feeling sad for billionaires, but I am concerned about how all of this is going to impact the average guy or gal because it always does. For billionaires, it trims their luxury. For the average person, it bites deep into their vitality.

It remains to be seen if Trump’s love for his billionaire buddies (the ones who get invited to Mar-a-Lago, not likely you; certainly not me) will cause him to reign in his tariffs. Yesterday he gave some sign that his stance is weakening. If it doesn’t, expect a really rough ride due to the tariff wars against multiple nations at the same time happening on top of the biggest government cuts in history happening throughout all departments of government at the same time.

Yes, major government cuts are essential to solving the credit crisis that led off this article, and certainly getting rid of fraud, which the Trump Administration publicly exposed today, is always helpful. We have no choice but to make huge cuts that should have been made nearly forty years ago but were not. The wrecking-ball approach, however, is making it hard before it even begins.

The rings of fire are spreading and consuming more and more of the earth. Chaos is never good for businesses or markets or for national economies or for international relations with trading partners or former allies … even without a mountain of debt to manage—debt that is dependent upon those relationships. The center is no longer holding, and former friends are fleeing. The chaos is expanding in outward rings with each impact of the wrecking ball like a stone striking the surface of a pond—rippling through all the economies of the world and spreading the distance between us.

********

David Haggith

David Haggith publishes The Daily Doom and writes satire. The Daily Doom contains economic, social, and political news about our troubled times--a non partisan weekday collection of the most consequential stories about our complex times with insightful editorials  and weekly economic analysis. As an equal-opportunity critic of America's sharply divided, two-ring political circus, David divides his satire into sister publications so you can pick the one you find agreeable and ignore her sassy sister.

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