The downgrade of the United States credit rating raises warnings of the risks of "printing money".
American billionaire and founder of Bridgewater Associates, Ray Dalio, warned that Moody's downgrade of the U.S. sovereign credit rating does not adequately reflect the real risks facing U.S. Treasury bonds, pointing out that agencies overlook the risk of the federal government resorting to printing money to pay off its debts.
This was stated in a post on his "X" platform, where Dalio said: "You should know that credit rating agencies underestimate credit risks, as they only assess the government's likelihood of defaulting on its obligations."
He added: "These agencies do not take into account the greater risk, which is governments burdened with debt resorting to printing money to meet their obligations, resulting in bondholders suffering losses due to the devaluation of the money they receive, not just its quantity reduction."
Moody's had downgraded the U.S. credit rating from Aaa to Aa1 last Friday, citing worsening federal budget deficits and rising debt service costs.
Moody's is the latest agency, among the three major agencies (alongside Standard & Poor's and Fitch), to withdraw the U.S. economy's excellent rating.
U.S. stocks fell on Monday, May 19th, while Treasury bond yields jumped, with the 30-year bond yield rising to 4.995% and the 10-year bond yield to 4.521%, in direct response to the downgrade decision.
Dalio confirmed that the real risks to bondholders are not only measured by the likelihood of default, but also by the erosion of the real value of money due to inflation, saying: "For those concerned about the value of their money, the risks associated with U.S. government debt exceed what credit rating agencies show."
It is worth noting that Bridgewater's assets under management decreased by 18% in 2024, reaching $92 billion, compared to its peak in 2021 at $150 billion, according to a report published by Reuters last March.
