Moody’s Downgrades US Credit Rating: A Lesson in Innocence from Ancient Chinese Philosophy on Building Trust Systems

On May 16, 2025, the global financial market was shaken by significant news: Moody’s, an international rating giant, suddenly downgraded the US sovereign credit rating from the highest Aaa to Aa1 and adjusted the outlook from “negative” to “stable”. This decision immediately set off a storm in the United States and sent shockwaves through the global capital market. Who would have thought that US bonds, long regarded as a “safe haven” for global funds, would lose their luster due to the country’s own fiscal issues? Looking back through history, from the decline of the British Empire’s invincible fleet to the fall of numerous ancient Chinese dynasties within two or three hundred years, inflation and the collapse of the trust system have always been closely associated with the decline of dynasties. When currency loses its credibility, social order and the foundation of the regime also become shaky. This time, let’s explore how to construct and maintain “trust,” the “soft infrastructure” in the economic and political fields, with the help of the ancient wisdom of Innocence from the Book of Changes.​

I. Details of Moody’s Downgrade of US Sovereign Credit Rating​

Downgrade Time and Level​

On May 16, 2025, Moody’s officially announced the downgrade of the US sovereign credit rating from Aaa to Aa1, marking a significant change in the US credit rating system. The shift of the outlook from “negative” to “stable” may seem like a reassuring signal, but it actually implies underlying concerns about the persistent US fiscal problems. This downgrade not only shatters the long – standing US credit myth but also prompts global investors to re – evaluate the US economic prospects. According to moodys.com, this event has drawn widespread attention in the global financial community.​

Reasons for the Downgrade​

1. High Government Debt: The US government debt problem has long been deeply rooted. Data shows that the total US government debt has exceeded the ​36trillionmark,almostdoublingfrom28 trillion in 2019 within just a few years. This explosive growth in debt far outpaces economic growth. Historically, the US debt – to – GDP ratio peaked after World War II and then gradually declined, but it has been rising continuously since the 2008 financial crisis and is now at a historical high. Such a huge debt scale places the US government under enormous debt – servicing pressure.​

2. Rising Interest Expenditure: With continuous interest rate hikes by the Federal Reserve, the proportion of the federal government’s annual interest payments in the budget has increased significantly. Currently, the US government spends hundreds of billions of dollars on interest payments each year, and this figure continues to grow with interest rate fluctuations. The heavy interest burden severely squeezes other public expenditures, such as those on education, healthcare, and infrastructure construction, putting great pressure on budget sustainability. This situation is similar to a family where most of the monthly income goes to debt interest payments, resulting in a decline in living quality and limited future development.​

3. Fiscal Deficit and Policy Uncertainty: The differences and disputes between the US Congress and the executive branch over fiscal policies have made it difficult to reach a medium – and long – term fiscal balance plan. In recent years, the US government has faced the debt ceiling crisis several times, and political struggles between the two parties have led to a lack of coherence and stability in fiscal policies. For example, during the response to the COVID – 19 pandemic, the US government launched a large – scale fiscal stimulus plan. Although it stabilized the economy in the short term, it further increased the fiscal deficit. The lack of predictability in future budget planning has made investors question the US government’s fiscal management ability.​

Impact of the Rating Downgrade​

1. Domestic Economy: After the rating downgrade, the US bond market reacted strongly. The yield on the 10 – year Treasury note once rose above 4.5%, and the 30 – year yield touched above 5%, reaching a new high since November 2023. The increase in Treasury yields directly affected the mortgage market, with the 30 – year fixed – rate mortgage rate climbing above 7%, significantly increasing the cost of home purchases. This has discouraged many potential homebuyers, and the real estate market has fallen into a slump. At the same time, the cost of corporate financing has also increased, suppressing corporate investment and expansion plans and negatively impacting economic growth.​

2. Global Financial Market: US Treasuries have long been regarded as the safest assets in the world and a haven for global funds. This rating downgrade may lead to the reallocation of international capital, with funds flowing to other sovereign bond markets, such as those of Germany and Japan. Emerging market countries will face further increased financing costs as investors reduce their investments in emerging market assets due to risk – aversion. Some countries may re – evaluate their asset allocation strategies for the United States. For example, major holders of US Treasuries like China and Japan may adjust the structure of their foreign exchange reserves and reduce their holdings of US Treasuries. As reported by reuters.com, these impacts are gradually emerging in the global financial market.​

Comparison with Other Rating Agencies​

As early as August 2011, Standard & Poor’s was the first to downgrade the US rating from AAA to AA +, causing severe turmoil in the global financial market at that time. In August 2023, Fitch also downgraded the US rating from AAA to AA +. Now, Moody’s has become the third agency to strip the United States of its top – level rating. The collective actions of the three major rating agencies fully reflect the long – standing and unresolved US fiscal problems and indicate that the deep – seated issues of the US economy can no longer be ignored.​

II. The Connection between the Rise and Fall of Dynasties and the Collapse of Trust​

The Historical Reflection of Currency Inflation​

In ancient Chinese history, the late Han Dynasty, the late Tang Dynasty, and the late Ming Dynasty were all typical periods of currency inflation and trust collapse. During the late Han Dynasty, due to long – term wars, the government’s fiscal revenue could not cover its expenditure. To raise military funds, a large number of low – quality currencies were minted, leading to soaring prices. Historical records show that the price of a hu of millet soared from dozens of coins in normal times to millions of coins. The situation was similar in the late Tang Dynasty. With separatist warlords and frequent wars, the central government, in order to maintain huge military expenditures, continuously issued more currency, causing currency devaluation and hardship for the people. In the late Ming Dynasty, facing internal and external troubles, the government, to make up for the fiscal deficit, issued a large amount of paper currency “Daming Baochao”. However, due to the lack of effective issuance management and reserve support, the Baochao quickly depreciated. During the Chongzhen period, the price of rice increased dozens of times compared with the early Ming Dynasty, and the people’s trust in the Baochao completely collapsed, leading them to switch to using silver for transactions.​

During these periods, the people began to hoard a large amount of precious metals and physical commodities and abandon official currency, which was a direct manifestation of the collapse of trust. The people no longer believed that currency could represent value and chose to use physical objects to preserve their wealth, resulting in the collapse of the currency circulation system.​

The Negative Effects of the Collapse of Trust​

1. Social Turmoil: The instability of the currency system led to the re – distribution of social wealth, further widening the gap between the rich and the poor. The wealth of ordinary people shrank due to currency devaluation, and their lives became difficult, while some speculators took the opportunity to profit. This unfair distribution of wealth triggered public dissatisfaction and anger, intensifying social contradictions, with thieves running wild and peasant uprisings breaking out one after another. For example, the Huang Chao Uprising in the late Tang Dynasty and the Li Zicheng Uprising in the late Ming Dynasty both broke out against the backdrop of acute social contradictions and the people’s hardships.​

2. Business Stagnation: The collapse of trust severely affected private business transactions. Due to the instability of currency value, merchants were no longer willing to offer credit or make advance payments, and business transactions regressed to the primitive state of barter. The scale of market transactions shrank significantly, and economic vitality was greatly reduced. Commercial shops in cities closed down one after another, artisans lost their jobs, and the entire economy fell into recession.​

3. Shaking of the Regime Foundation: National tax revenue mainly depends on the monetary economy. The collapse of the currency system led to a sharp decline in national tax revenue. The government was unable to raise enough funds to maintain the operation of the military and the bureaucracy. The combat effectiveness of the military declined, and corruption became rampant in the bureaucracy. Under the impact of external enemy invasions or internal peasant uprisings, the foundation of the regime was shaken, eventually leading to its downfall.​

Common Factors in the Trust Life Cycle of Dynasties​

1. Political Corruption: In the rise and fall of dynasties, political corruption was often an important factor contributing to the collapse of trust. Frequent power – money transactions among officials, abuse of power for personal gain, and widespread corruption and bribery gradually weakened the government’s credibility, and the people’s trust in the imperial court gradually eroded. For example, in the late Qing Dynasty, corruption in the officialdom was rife, and the phenomenon of selling official positions was common, making it difficult for the government’s decisions and policies to gain the support and trust of the people.​

2. Economic Imbalance: Unequal distribution of resources and the concentration of wealth in the hands of a few were problems faced by many dynasties. The noble, bureaucratic, and wealthy merchant classes accumulated wealth through various means, while the vast majority of farmers and artisans lived in poverty. This economic imbalance led to the intensification of social contradictions. The people began to doubt the fairness and justice of society, which in turn affected their trust in the regime.​

3. Frequent Wars: War was one of the important reasons for the financial crisis and currency inflation of dynasties. To meet the needs of war, the government continuously levied taxes and minted coins, exacerbating inflation. At the same time, war also destroyed social production and economic order, making the people’s lives difficult and further weakening the people’s trust in the regime.​

III. Interpretation of Innocence and Its Implication for Trust​

Image and Meaning of Innocence​

Innocence in the Book of Changes has Qian (Heaven) on the top and Zhen (Thunder) on the bottom, symbolizing the movement of thunder in the sky. This image implies a powerful deterrence and warning, reminding people to follow the natural right path. The meaning of Innocence emphasizes that only by conforming to the right path can there be prosperity and smoothness; if one deviates from the right path, disasters will occur, and it is not conducive to any actions. This contains profound philosophy and has important guiding significance for understanding and handling trust issues.​

The Value of Truth and the Right Path​

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The core of Innocence lies in being sincere, without false embellishments, and not violating one’s original intention. In social and economic activities, once enterprises or the government deviate from the principle of integrity, such as engaging in false propaganda, financial fraud, and other behaviors, a trust crisis will inevitably occur. Take the example of Enron, a once – energy giant in the United States. It whitewashed its performance through financial fraud and deceived investors and the public. However, lies cannot last forever. After the truth was revealed, Enron quickly went bankrupt, its executives faced legal sanctions, and investors suffered heavy losses. This case fully illustrates the serious consequences of violating the principle of integrity.​

On the contrary, adhering to true, transparent, and verifiable behaviors can win long – term trust. Huawei Technologies Co., Ltd. adheres to independent research and development and continuously invests in and innovates in the field of communication technology. In the face of external pressures and challenges, Huawei always maintains the authenticity and reliability of its technology and has won the trust and recognition of global customers. Today, Huawei has become a leading global communication equipment supplier, and its success is inseparable from its adherence to integrity and quality.​

Coping with “Unexpected Disasters”​

Innocence also implies the idea of facing “unexpected disasters,” which are external shocks not caused by one’s own faults. In today’s globalized economic environment, all countries may face various sudden external shocks, such as the global economic crisis, geopolitical conflicts, etc. In the face of these unforeseen risks, they should be dealt with courageously and intelligently, rather than shirking responsibilities or covering up problems.​

After the outbreak of the global financial crisis in 2008, the Chinese government promptly introduced a 4 – trillion – yuan economic stimulus plan. By expanding domestic demand, strengthening infrastructure construction, and other measures, it stabilized economic growth. At the same time, the government maintained open and timely communication of information, transmitted positive signals to the public and the market, allowed all parties involved to clearly understand the situation, and worked together to resolve the risks. This way of coping reflects the wisdom of facing “unexpected disasters” in Innocence and successfully helped the Chinese economy recover from the crisis first.​

IV. Reflections on Building a Long – Term Trust System Based on Innocence​

At the Individual Level: Integrity as the Foundation​

At the individual level, integrity is the cornerstone of standing in society. In daily life, we should start from small things, be consistent in words and deeds, and avoid exaggeration. We should firmly fulfill the promises we make, and if we are unable to do so due to special circumstances, we should communicate in a timely manner and apologize sincerely. When we make mistakes, we should have the courage to admit them and make timely corrections, winning the trust of others with a sincere attitude. For example, in business cooperation, an individual’s integrity record will directly affect the trust level and cooperation intention of partners. An honest and trustworthy person is more likely to establish good interpersonal relationships and business reputation in society.​

At the Enterprise and Organization Level: Quality and Transparency​

As the main body of the market economy, enterprises should take integrity management as their foundation. Products and services should be of high quality and free from false propaganda. Take the Japanese century – old store “Kongo Gumi” as an example. Since its establishment in 578 AD, it has always adhered to the “craftsman spirit” and paid attention to project quality. In every construction project, Kongo Gumi strictly controls the quality to ensure the reliability and durability of the project, winning the long – term trust of customers and becoming one of the oldest enterprises in the world.​

In addition, enterprises should also establish an open third – party supervision mechanism, enabling customers and stakeholders to understand the enterprise’s operating conditions in real – time. For example, some food enterprises introduce third – party testing agencies to conduct strict testing on product quality and publicly disclose the test results to the society, enhancing consumers’ trust in the products.​

At the Social and National Level: System and Supervision​

At the social and national level, system construction is the key to building a trust system. The government should improve laws and regulations, severely punish dishonest behaviors, and establish a blacklist and joint – punishment mechanism. For behaviors such as false propaganda and financial fraud by enterprises, as well as dishonest behaviors such as fraud and debt evasion by individuals, they should be severely punished in accordance with the law to increase the cost of dishonesty.​

At the same time, the government should enhance the predictability and coherence of policies, making market expectations consistent with actual implementation. For example, countries such as Sweden and Germany have successfully established a social trust system spanning decades with a sound social security system and tax transparency. Sweden’s high – welfare policy complements its high – tax system. Through fair wealth distribution and transparent tax management, it has won the trust and support of the people. Germany’s manufacturing policy has been stable for a long time, focusing on technological innovation and talent cultivation, enabling the German manufacturing industry to establish a high – quality and trustworthy image globally.​

V. Summary and Prospect​

Moody’s downgrade of the US sovereign credit rating, seemingly a change in fiscal figures, actually reflects the deep – seated crisis of trust collapse. From the rise and fall of ancient dynasties to today’s rating setbacks of the United States, all tell us that trust is the most fragile yet most indispensable “intangible asset”. In the economic field, trust is the basis of market transactions; in the political field, trust is the cornerstone of regime stability.​

By drawing on the wisdom of “truth, sincerity” and “facing risks” in Innocence, we should jointly practice integrity and the right path at the individual, enterprise, and national levels. Only in this way can we build a stable and long – lasting trust system that spans thousands of years and provide a solid guarantee for social prosperity and the continuation of human civilization. In the future, let us continue to explore the wisdom of traditional culture and combine it with modern institutional innovation to jointly explore the infinite possibilities of the “trust economy”. In today’s globalization, all countries should work together to establish a more fair, just, and transparent international economic order, jointly maintain the stability of the global trust system, and promote the sustainable development of human society.