For years, we’ve been hearing that the combination of childish governance and chronic budget deficits would eventually catch up with the United States, but the US always outran the worrywarts. That era, one in which the Treasury could borrow limitlessly and at low cost, may be ending.

“For the first time in my professional life, we’re seeing a shift, with investors looking askance at Treasury debt,” John Velis, a money manager at BNY Mellon told Politico. The spark looks to have been Moody’s downgrade of the Treasury’s credit rating, but there was no new information in the rating agency’s decision. It did, however, as Velis noted, “focus minds.”

Moody’s is one of three big ratings agencies. Their main business is assessing the risk of default — that the debtor, whether a company or a government, may miss an interest payment or repayment of principal on their loan — and their major way of communicating that risk is a letter rating, looking much like a grade. Each has a different system, but they range from AAA down to C or D (as in default). Some institutional investors are, under government regulation or internal policy, required to buy only high-rated debt. Moody, using its own idiosyncratic system, cut the United States from Aaa, the highest, to Aa1, second highest.

In its downgrade, Moody’s pointed to interest and debt burdens that are “significantly higher” than the US’s rich-country peers, while noting that the country still has exceptional strengths, like the size and dynamism of its economy. But those strengths “no longer fully counterbalance the decline in fiscal metrics.” They’re discreetly confident in the face of the political challenges of the Trump era: “Institutions and governance will not materially weaken, even if they are tested at times.”

S&P Global Ratings (formerly Standard & Poor’s) was the first of the big three ratings agencies to cut their rating on US Treasuries, back in August 2011. Curiously, über-investor Warren Buffett and former Federal Reserve chair Alan Greenspan both dismissed the move, saying the United States could never default because we borrow in dollars — many other countries don’t have the privilege of borrowing in their own currency — and we can just print them as needed.

That’s true. It would be inflationary and panic-inducing, but it still wouldn’t be a default. S&P’s reasoning for the cut fourteen years ago was much like Moody’s in mid-May: “The effectiveness, stability, and predictability of American policymaking and political challenges have weakened at a time of ongoing fiscal and economic challenges,” meaning chronic deficits and rising debt. The world of 2025 seems rather less stable and predictable than that of 2011.

Fitch, the smallest of the big three, announced its downgrade in August 2023, offering reasons very similar to S&P’s: rising debt and “a steady deterioration in standards of governance.” Countering that, Fitch noted high US scores on indexes of Political Stability and Rights, the Rule of Law, Institutional and Regulatory Quality, and Control of Corruption (caps in original). That looks quaint at a time when US tariffs on imports from China can go from 31 percent to 135 percent and back to 51 percent in just a few months on the whim of just one man, a man who happily disregards the law and who’s made a bundle on his own meme coin while using his office promoting crypto.

Fitch added that factors that could lead to another downgrade include “a marked increase in general government debt” and “a decline in the coherence and credibility of policymaking that undermines the reserve currency status of the U.S. dollar, thus diminishing the government’s financing flexibility.” We are very much there, but no critical comments yet from Fitch.

Fitch’s comment about the reserve currency status refers to the dollar’s role as the global currency, the one major commodities like oil are priced in, and the one in which countries keep their foreign reserves. (Foreign reserves are holdings that countries keep of currencies other than their own that serve as cushions in case of a foreign payments crisis. As of last year, 58 percent of those worldwide were denominated in US dollars.)

That reserve status has depended in part on the enormous size of the US economy and its financial markets; no market in the world matches the US Treasury market’s capacity to absorb billions in inflows and outflows with only the slightest ripple. But it also depends on the United States’ role as the foundation of capitalist power globally and its ultimate guarantor in a crisis.

During the 2008 financial crisis, the Fed and Treasury led a globally coordinated bailout. It’s not clear that Trump’s government would have the competence or stature to do the same today. Trump has deliberately frayed the ties among the principal capitalist states, and the US today is a source of systemic disorder, not stabilization.

Evidence of the “shift” that Velis cited can be found in the unprecedented ways in which markets panicked on Liberation Day, April 2, when Trump announced his big, not-so-beautiful tariffs. Normally in times of political or economic stress, investors from around the world plow into US assets, notably Treasury bonds. Since you need dollars to buy Treasuries, such flights to quality, as they’re called usually, push up the value of the dollar.

That didn’t happen after Liberation Day: the dollar fell, a sign that investors were dumping US assets rather than buying them. George Saravelos, a Deutsche Bank currency analyst (funny, since Deutsche was one of the few major banks to lend to Trump over the years, on often questionably generous terms), diagnosed a “dramatic regime change in markets” and an increasingly likely “confidence crisis” in the dollar. That panic has ebbed, but it does feel like something has changed.

In its downgrade note, Moody’s said, “US institutions and governance will not materially weaken, even if they are tested at times.” Hope dies last.